Could Intense Competition Increase Verizon’s Churn Rate in 4Q17?

Verizon’s churn rate

Now let’s take a look at Verizon’s (VZ) customer retention metric, or its churn rate. Wall Street analysts anticipate Verizon’s postpaid phone churn rate to rise in 4Q17 mainly due to growing competition in the postpaid market and strong promotional offers from competitors.

Earlier in 3Q17, Verizon reported a postpaid phone churn rate of 0.75%, the tenth consecutive quarter in which it had a postpaid phone churn rate of less than 0.90%. This could be significant given that its competitors T-Mobile (TMUS) and Sprint (S) have made much of their capabilities to steal subscribers from other major wireless service providers, including AT&T (T) and Verizon.

Could Intense Competition Increase Verizon’s Churn Rate in 4Q17?

A rising churn rate is adverse for mobile carriers because they have to incur additional acquisition costs related to customers, which has a further adverse impact on operating margins. As a result, a rise in a company’s churn rate can be alarming for investors.

A peer comparison of postpaid phone churn in 3Q17

In 3Q17, Sprint and T-Mobile reported postpaid phone churn rates of 1.6% and 1.2%, respectively. Meanwhile, AT&T reported a postpaid phone churn rate of 0.84% during the same period. These results indicate that among the top four US wireless service providers, Verizon continues to have the best postpaid phone churn rate.