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Sprint May Have a Customer Retention Problem

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Sprint beat AT&T and Verizon in postpaid phone additions

Sprint (S) reported its fiscal 2Q17 (September quarter) results on October 25, revealing gains in customer acquisition while posting a disturbing development on the customer-retention front.

Sprint added 279,000 postpaid phone net connections in 3Q17—the second-highest among the top four US (SPY) wireless carriers in that period. T-Mobile (TMUS) continued to lead on this front, gaining 595,000 postpaid phone customers, up from 533,000 in 2Q17.

Verizon Communications (VZ) added 274,000 postpaid phone net connections, while AT&T (T), lost 241,000 postpaid phone connections in 3Q17.

Sprint reverses prepaid losses

Sprint also made significant gains in the prepaid market, adding 95,000 net prepaid phone connections and reversing a loss of 449,000 prepaid phone connections in 3Q16.

But as much as Sprint is adding new phone customers, the company seems to have a lot to do in building a loyal customer base that can withstand the brutal competition in the US wireless market. Sprint’s customer retention challenge came to the fore in 3Q17 as the company’s churn rate rose both sequentially and YoY (year-over-year).

Sprint’s churn compares poorly with the competition

Sprint reported postpaid phone churn of 1.59% in 3Q17, up from 1.5% in 2Q17 and up from 1.37% in 3Q16.

By contrast, AT&T’s postpaid phone churn in 3Q17 was 0.84%, while Verizon’s postpaid phone churn was 0.75%, and T-Mobile’s postpaid phone churn came in at 1.23%. (Churn is a measure of customer defection—the lower the metric, the better). T-Mobile said its postpaid phone churn was down 0.09% YoY in 3Q17.

Notably, Sprint’s prepaid churn actually fell YoY in calendar 3Q17.

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