AT&T’s churn increased in 4Q14
Analyzing AT&T’s 4Q14 wireless segment results (Part 6 of 10)
Anticipated increase in AT&T’s churn
Earlier in this series, we learned about the surge in telecom sales and increased competition among the largest telecoms during the last quarter. In this part of the series, we’ll focus on postpaid churn rate, an important metric that measures a telecom company’s customer attrition.
AT&T reported a low churn in the first three quarters of 2014. Among the national carriers, AT&T had the best churn rate at the end of 3Q14. It was closely followed by Verizon (VZ) during the same period. Sprint (S) had the worst churn rate among the national carriers. Please read Post-paid churn is one of the most important wireless indicators to learn more.
However, AT&T’s churn increased, both sequentially and year-over-year, in the last quarter of 2014. The company’s management had anticipated a high churn in 4Q14, largely due to a surge in sales accentuated by the launch of Apple’s iPhone 6 in September 2014.
AT&T appears satisfied with its high 4Q14 churn
According to AT&T’s management, the last quarter of 2014 was comparable to the same period in 2012 in terms of postpaid churn. Apple’s iPhone 6 was launched in September 2014, about two years after its launch of the iPhone 5.
In 4Q12, AT&T postpaid churn was marginally lower than 1.2%—its 4Q14 churn rate. However, the company’s management acknowledged that the quarter’s churn increased due to significant competition among the US telecoms. Also, all four national carriers sold iPhones in 2014 compared to three carriers in 2012. AT&T’s management believes that its low full-year churn is largely due to sticky customers in its Mobile Share Value accounts and Next installment plans.
Please read Why the Next model’s more valuable to AT&T than the subsidy model to learn more about the Next plans. You can learn more about Mobile Share Value accounts by reading AT&T’s Mobile Share Value plan may grow in 4Q14.
If you can want to take a diversified exposure to AT&T, you can invest in the Technology Select Sector SPDR ETF (XLK), which held ~4.4% in the company at the end of January 2015.
Browse this series on Market Realist:
