uploads///Telecom Q Postpaid Phone Churn_Peers

Could Intense Competition Increase AT&T’s Churn Rate in 1Q18?

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Apr. 11 2018, Updated 8:01 a.m. ET

AT&T’s postpaid phone churn rate

In the previous part of this series, we looked at AT&T’s (T) expected prepaid customer net additions in 1Q18. In this article, we’ll look at AT&T’s customer retention metric—the churn rate in combined domestic wireless operations. Wall Street analysts expect AT&T’s postpaid phone churn rate to increase, resulting from growing competition in the postpaid space and strong promotional offers from competitors.

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In 4Q17, AT&T reported its best fourth-quarter postpaid phone churn rate of 0.89%, compared to 0.98% in 4Q16. AT&T’s management attributed this decline to the wireless video bundle. This trend could be significant given that Sprint (S) and T-Mobile (TMUS) promoted their ability to attract customers from other mobile carriers such as Verizon (VZ) and AT&T.

Peer comparisons of postpaid phone churn in 4Q17

Among the top four major US wireless service providers, Verizon reported the best postpaid phone churn rate of 0.77% in 4Q17. Sprint and T-Mobile reported postpaid phone churn rates of ~1.7% and ~1.2%, respectively, during the same period.

A rise in churn rate is negative for mobile carriers. These carriers must account for additional acquisition expenses related to customers, which has a further negative impact on operating margins.

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