AT&T’s postpaid phone churn rate
Previously, we discussed AT&T’s (T) prepaid customer net additions over the last few quarters. In this part, we’ll assess AT&T’s customer retention, measured by its combined domestic wireless churn rate. During AT&T’s 4Q17 earnings conference call, management noted that the company’s postpaid phone churn rate had improved year-over-year.
In 4Q17, AT&T reported its best-ever fourth-quarter postpaid phone churn rate, 0.89%, compared with 0.98% in 4Q16. AT&T attributed this decline to its wireless-video bundle. This decline may be significant, as T-Mobile (TMUS) and Sprint (S) have been focusing on drawing customers from Verizon (VZ) and AT&T.
Peer comparison: Postpaid phone churn rate
In 4Q17, among the top four major US wireless service providers, Verizon reported the best postpaid phone churn rate. Verizon and T-Mobile had churn rates of 0.77% and 1.1%, respectively, while Sprint had a postpaid phone churn rate of 1.7% in fiscal 3Q17 (quarter ended December 2017).
A higher churn rate is adverse for telecom companies as it indicates they might have higher customer acquisition costs, which may impact companies’ operating margins. As a result, a higher churn rate can also cause concern among investors.