How Did U.S. Wireless Carriers’ Postpaid Businesses Trend In Q2?

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The postpaid wireless businesses of the major U.S. carriers remained relatively strong in the second quarter of 2016, despite increasing wireless penetration and saturation in the U.S. wireless market. The big four players added a total of 725k million postpaid phone subscribers, marking a 13% sequential jump, while churn figures also largely trended lower. There is a possibility that the metrics could improve over Q3, amid higher-profile handset launches and related promotions. Below we provide an overview of the four carriers’ metrics from Q2.

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us_carriers_postpaid_q2_16

  • T-Mobile continued to lead the industry in terms of postpaid phone adds, driven by its improving network quality and value-added offers, which are helping the firm attract and retain customers. Sprint also had a surprisingly strong quarter, adding a net of 173k postpaid phone customers, marking the first time in over five years that it gained more postpaid subscribers from each major carrier than it lost to them. Verizon saw its phone base improve marginally after posting declines during Q1, while AT&T continued to lose customers, albeit at a slightly lower pace, amid attrition of its lower-value feature phone subscribers (ARPU ~ $35 vs. $55+ for smartphones).
  • Postpaid churn has been trending lower across the industry, on account of better customer quality and more devices per account, which effectively increases switching costs for customers.  This is a positive trend, as it could allow carriers to cut down on customer retention costs, bolstering margins. Sprint’s postpaid phone churn declined 10 bps year-over-year to 1.39%, marking the lowest postpaid phone churn in company history. T-Mobile and AT&T also saw small year-over-year gains to their churn figures. Verizon, which reports only overall postpaid churn including non-phone postpaid devices, saw the metric rise by 4 bps, amid attrition of tablet customers who signed up for promotions two years ago.
  • T-Mobile’s ARPU remained the lowest among the nationwide carriers, driven by its value pricing and its head start in the adoption of equipment installment plans, which offer lower service fees to customers in return for purchasing devices separately. T-Mobile’s ARPU declined modestly year-over-year, driven by promotional activity, while Sprint and AT&T saw sharper declines amid a tough comparison with 2015, when a larger portion of their subscriber base was on device subsidized plans. 

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