AT&T’s Postpaid Operations In Focus As It Reports Q3 Results

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AT&T (NYSE:T) is expected to publish its Q3 2018 results on October 24, reporting on a quarter that likely saw the carrier continue to post improvements in its postpaid and prepaid wireless business while continuing to integrate its recently acquired Time Warner operations. Below, we take a look at what to expect from the company’s bread-and-butter wireless business when it publishes earnings Wednesday.

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Postpaid Business Should Continue To Grow, With Services Revenue Trending Higher

AT&T has slowly been turning around its postpaid phone business, which had been witnessing subscriber attrition due to the defection of low-value feature phone users. During Q2 2018, postpaid phone net adds stood at 46k, compared to the year-ago period, when the company lost about 89k net subscribers. It’s likely that the momentum continued over Q3, driven by the launch of iconic devices including the iPhone XS and Galaxy Note 9 device as well as promotions on other devices. Over the second quarter, the company also posted its first year-over-year increase in wireless service revenue growth since 2014, and it indicated that the momentum could pick up over the second half of the year. We expect postpaid phone churn to remain low, driven by AT&T’s increased bundling of wireless and video services. Earlier this year, the company launched a new skinny bundle called WatchTV, which it will be providing for free to customers of its unlimited plans.

AT&T’s prepaid business has also been performing well. Over Q2, the company posted 453k prepaid net adds, out of which 356k were phone net adds. Churn in the prepaid business has also been trending lower, driven by its multi-line plans and auto bill pay, for which the company offers a small discount on plan pricing. The prepaid market has been undergoing significant changes, with the plans becoming more like postpaid offerings in terms of pricing and structure. For instance, AT&T offers an Unlimited Extra prepaid plan on its Cricket brand priced at about $60, which is close to the pricing of postpaid plans.

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