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Expectations for Verizon’s Prepaid Net Additions in 1Q18

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Verizon’s prepaid customer growth

Previously, we discussed expectations for Verizon’s (VZ) postpaid phone customer net additions in 1Q18. In this part, we’ll look at the prepaid customer net additions we could expect from Verizon. Wall Street analysts expect 10,000 prepaid subscriber net losses for Verizon in 1Q18 due to competition growing in the prepaid market.

In 4Q17, Verizon lost 184,000 prepaid customers, compared with 9,000 in 4Q16. This significant decline was primarily due to basic prepaid phones, as the company is not focusing on lower-value prepaid customers.

Costs related to prepaid subscribers are much lower than those for postpaid subscribers, making prepaid subscribers more profitable. Acquisition, maintenance, and upfront expenses are all lower for prepaid subscribers.

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Peer comparison

In 4Q17, T-Mobile (TMUS) and AT&T (T) added 149,000 and 140,000 net prepaid customers, respectively. Meanwhile, Sprint (S) reported 63,000 prepaid customer net additions in fiscal 3Q17 (quarter ended December 2017).

At the end of calendar 4Q17, Verizon’s retail postpaid subscriber base was the largest among the top four US (SPY) wireless service providers, while Verizon had the smallest retail prepaid subscriber base. T-Mobile’s prepaid subscriber base was the largest, at 20.7 million customers. AT&T and Sprint followed with 15.3 million and 9.0 million prepaid subscribers, respectively. Verizon had 5.4 million prepaid subscribers.

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