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Why Did T-Mobile’s Prepaid Customer Net Additions Slow Down?

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T-Mobile’s prepaid net additions

T-Mobile (TMUS) added 199,000 net prepaid customers in the first quarter, a significant YoY (year-over-year) fall from the 386,000 customers it added in the first quarter of 2017. However, its net addition of prepaid customers in the first quarter improved from the 149,000 it added in the fourth quarter of 2016.

At the end of 2017, its prepaid customers added totaled 855,000, down 65.9% from its 2016 customer additions.

In comparison, AT&T (T) added 192,000 net prepaid phone customers, while Sprint (S) gained 170,000 net prepaid subscribers during the same period.

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Prepaid customers slowing down

As we can see in the chart above, T-Mobile’s prepaid customer additions are slowing down from the previous year’s quarter. The prime reason for the slowdown is increased competition from peers in the wireless market and higher customer deactivations.

Note that prepaid customers are more profitable than postpaid ones, as the expenses associated with prepaid customers are much lower than the costs related to postpaid customers.

Prepaid churn rate

In the first quarter, T-Mobile’s prepaid churn rate improved sequentially and YoY. T-Mobile’s first-quarter prepaid churn rate stood at 3.9%, down six basis points from its fourth-quarter churn rate of 4.0% driven by its value offerings and increased customer loyalty owing to improvements in network quality. Its prepaid churn rate was also down seven basis points on a YoY basis from 4.0% in the first quarter of 2017.

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