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AT&T Reported Record Low Postpaid Phone Churn Rate in 3Q17

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AT&T’s postpaid phone churn rate

AT&T’s (T) postpaid phone churn rate in combined domestic wireless operations improved YoY (year-over-year) in 3Q17. The telecom company reported its best-ever postpaid phone churn rate of 0.84% in 3Q17 as compared to 0.90% in 3Q16. The company attributed this decline to the wireless-video bundle.

During the Morgan Stanley Technology, Media, and Telecom Conference held on November 16, 2017, John Stephens, AT&T’s EVP and CFO, spoke about the company’s churn rate. Stephens stated, “Our postpaid phone churn set a record for how low it was. It was 0.84, and it’s obvious that the benefits of bundling video, DTV Now, our HBO bundle that we put together, is really giving our customers a great value, great service. And quite frankly, it certainly implies that it’s leading them to stay with us in much greater numbers.” Thus, the company’s churn levels will likely remain low through 4Q17.

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Peer comparison of postpaid phone churn rate

In 3Q17, among the top four US wireless companies, Verizon (VZ) reported the best postpaid phone churn rate. In 3Q17, T-Mobile (TMUS) and Verizon reported postpaid phone churn rates of 1.2% and 0.75%, respectively. Meanwhile, in fiscal 2Q17, Sprint (S) reported a postpaid phone churn rate of 1.6%.

A rise in churn rate is bad for telecom companies, as they have to deal with added acquisition expenses related to new customers, which has a further adverse impact on companies’ operating margins. Thus, a rise in churn rate could be a cause of concern for investors.

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