Stiff Industry Competition Has Caused High Churn for Sprint

Now let’s look at Sprint’s (S) customer retention metric, or its churn rate. Sprint’s postpaid phone churn rate remains the highest in the US wireless industry. The telecommunications company’s postpaid phone churn rate rose YoY (year-over-year) in the third quarter of fiscal 2018.

In the third quarter of fiscal 2018, Sprint reported a postpaid phone churn rate of 1.84% compared to 1.71% in the third quarter of fiscal 2017. This increase was majorly driven by subscribers rolling off promotional offers.

An increasing churn rate is adverse for telecommunications companies because they have to deal with additional acquisition expenses, which negatively affect their operating margins. As a result, a rise in a company’s churn rate could be a cause for concern among investors.

Among the top four major US wireless carriers, Verizon (VZ) continued to have the best postpaid phone churn rate of 0.82% in the quarter that ended on December 31, while AT&T (T) posted a postpaid phone churn rate of 1.00%. T-Mobile (TMUS) hasn’t yet reported its financial results. Wall Street analysts expect T-Mobile to report a postpaid phone churn rate of 0.99% in the same quarter.