U.S. Postpaid Wireless Market: 2016 In Review

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The U.S. postpaid wireless market had a relatively mixed 2016. While postpaid net additions among nationwide carriers fell by about 30% year over-year for the first nine months of 2016 amid increasing saturation in the wireless market, most carriers saw minor operational improvements, in the form of higher per subscriber billings and lower postpaid phone churn. Below we provide a brief overview of the year-that-was for the U.S. postpaid wireless market.

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  • T-Mobile continued to lead the industry in terms of postpaid phone net additions, driven by its improving coverage and network performance as well as attractive value-added services which help it attract and retain subscribers. Sprint has also been turning around its business, adding a net of 542k postpaid phone users, while posting positive port ratios versus its three larger rivals over the last two quarters, driven in part by promotions such as offering 50% off porting customers’ existing bills. AT&T continued to perform poorly, losing 811k postpaid phone customers this year. The carrier has lost postpaid subscribers over eight straight quarters, amid attrition of lower-value feature phone users and stronger competition from smaller rivals. Verizon added just 42k phone subscribers, as its smartphone gains just about offset its feature phone losses.
  • Postpaid phone churn has generally been trending lower across the industry, on account of better customer quality and a focus on adding more connections per account, which typically 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 and T-Mobile cut their average postpaid phone churn by 11 bps and 5 bps respectively. Verizon, which reports only overall postpaid churn including non-phone devices, saw the metric rise by 3 bps year-over-year, amid attrition of subscribers who signed up for a free tablet promotion two years ago. AT&T’s churn also saw a slight increase.
  • T-Mobile’s Average billings per user (ABPU) for postpaid phone customers remained the lowest among the nationwide carriers, but there was a slight increase year-over-year. We expect things to get better going forward, as the carrier is phasing out its tiered data plans in favor of a new unlimited data plan called T-Mobile One, which has higher services fees compared to its most popular tiered plans. AT&T’s average ABPU saw the strongest gains on a year-over-year basis, amid significant attrition of feature phone subscribers, who often have service billings as low as ~$35 per month. Sprint’s ABPU also saw a slight increase year-over-year, amid higher equipment billings.
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