What to Expect from AT&T’s Postpaid Phone Net Additions in 1Q17

In the previous article, we discussed AT&T’s (T) expected EBITDA (earnings before interest, tax, depreciation, and amortization) margin in 1Q17.

In this article, we’ll look at the kind of postpaid phone net additions we can expect from AT&T in 1Q17. Wall Street expects AT&T’s postpaid phone net additions to be negative given intensified competition.

According to a FierceWireless report on March 30, 2017, “The firm reduced its projection for AT&T’s postpaid net additions from 400,000 to 125,000 for the quarter, and estimated the carrier will lose 300,000 postpaid phone customers during the period, down from its previous estimate of 125,000 net additions.”

In 4Q16, AT&T suffered a loss of 67,000 postpaid phone subscribers, less than its net loss of 268,000 in 3Q16. AT&T defended this loss by mentioning that it mainly reflected subscribers who were using high maintenance featured phones. The company said that these subscribers were low-margin subscribers, and it wants to focus on high-value customers with higher margins.

AT&T will continue to face pressure on its postpaid phone volumes in the upcoming years due to the increasingly competitive market. In comparison, Verizon’s (VZ) postpaid phone net additions were 167,000 in 4Q16, and Sprint’s (S) postpaid phone net additions were 368,000 in 4Q16. Meanwhile, T-Mobile (TMUS) reported 933,000 postpaid phone net additions during 4Q16.

Postpaid phone users, especially smartphone users, are of particular value to mobile carriers. Users of smartphones such as Google’s (GOOG) Pixel or Apple’s (AAPL) iPhone tend to have relatively high data usage, so they’re the most lucrative customers for telecommunications companies.

In the next article of this series, we’ll discuss the postpaid phone churn rate we can expect from AT&T in 1Q17.