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Why Sprint’s Churn Rate Is the Highest in the US Wireless Space

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Sep. 28 2017, Updated 9:40 a.m. ET

Sprint’s postpaid phone churn rate

In this part of our series, we’ll analyze Sprint’s (S) customer retention metric—the churn rate. Sprint’s postpaid phone churn rate is still the highest in the US wireless space. The carrier’s postpaid phone churn rate rose YoY (year-over-year) in fiscal 1Q17 (ended June 2017), when the company reported a postpaid phone churn rate of 1.50%, compared with 1.39% in fiscal 1Q16.

At the Goldman Sachs Communacopia Conference on September 14, 2017, Sprint CEO (chief executive officer) Marcelo Claure pointed out that it’s a conscious decision of Sprint’s to run its business in such a way that its churn rate ends up being different from those of its peers.

A rise in churn rate is unfavorable for telecommunication companies, given the extra acquisition costs associated with customers, which have an unfavorable impact on operating margins. Any rise in Sprint’s churn rate could be a cause for concern among investors.

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Peer postpaid churn rates

In 2Q17, Verizon Communications (VZ) continued to have the best postpaid phone customer retention rate of 0.7% among the top four US wireless carriers. AT&T (T) reported a postpaid phone churn rate of 0.79% during the same period, while T-Mobile (TMUS) reported a postpaid churn rate of 1.1%.

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