Performance analysis: Sprint, Verizon, AT&T and T-Mobile

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Telecom network operator T-Mobile has been thriving above rivals Verizon Wireless, AT&T, and Sprint for a few quarters now, and the company’s latest earnings carry the trend forward.

T-Mobile has added 2.2 million customers in Q1 2016, to make the customer base to 65.5 million customers while retaining its position as the fastest-growing wireless carrier in the U.S. The carrier, which occupies the third position in terms of overall customer base in the U.S., draws benefit from its strategies of the deployment of 700 MHz spectrum, as well as the increased advertising along with the pocket-friendly pricing models and services provided by it, such as Binge On. This is the 12th straight quarter of subscriber additions of more than 1 million for the company. The revenue has also risen 11 percent to $8.6 billion, driven by a 13 percent increase in service revenue to $6.6 billion.

At the same time, Verizon and AT&T both reported a fall in their phone subscriber base in the previous quarter with a net loss of 363,000 postpaid phone subscribers for AT&T, and an 8,000 postpaid phone subscriber loss for Verizon. AT&T gained 129,000 postpaid net additions, while Verizon gained 640,000 net postpaid accounts in the first calendar quarter.

Erstwhile, though Sprint has managed to add a total of 447,000 wireless subscribers in the first quarter of 2016, the revenue of the company suffered from the promotional deals it underwent to achieve the same. The operating revenue of the company fell to $8.07 billion in the fourth quarter ending on March 31, 2016 from the earlier $8.28 billion in 2015. The amount of net loss borne by the company also escalated to $554 million from the $224 million loss suffered one year earlier.

Also, T-Mobile enhanced its customer base by 42 percent when compared to the rival mobile carrier and phone owners while Sprint similarly grew its base by 30 percent. Verizon and AT&T witnessed smaller competitor customer attraction rates, at 14 percent and 10 percent, respectively.

The No. 1 carrier with 112.6 million base, Verizon, has its quarterly Capex lessened by 9.5 percent year over year to $2.2 billion, with the operator blaming the decline on the investments made late in the year to boost coverage in advance of the Super Bowl. The telecoms plans to densify its network throughout 2016. The hike in growth seen in Verizon is mainly due to the increasing uptake of Edge, the carrier’s equipment installment plan (EIP), while its strategy of focusing on lucrative customers has resulted in slower growth.

AT&T reported a Capex of $4.7 billion during the quarter, which is up by 17.6 percent year over year. The wireless Capex of the company was found to be slightly low when compared to the fourth quarter, which the carrier attributed to accelerated purchases of equipment to capture significant savings, last year. AT&T’s strategy of centering on profitable customers is to have resulted in higher margins, but the operator was expected to report 340,000 postpaid net subscriber adds, which is down by about 23 percent from the same period, a year ago.

In what is left of the year, if Verizon’s potential acquisition of Yahoo gets underway, it would add $8 billion, bringing the total media investment to $13 billion. This will in result make Verizon one of the top online/app content producers in the world.

T-Mobile has forecasted a gain range between 3.2 million to 3.6 million customers versus the previous target range of 2.4 million to 3.4 million customers, for the year. The operator will continue to generate free cash flow, which will in turn increase its financial leverage in advance of the upcoming incentive auction of 600 MHz spectrum.

For Sprint, connected devices have been a major driver for overall growth, with the carrier reporting more than 3 million net additions for the whole 2016, ending its latest quarter with more than 10.3 million connected devices on its network. Sprint has been running promotional campaigns by offering customers from AT&T, T-Mobile, and Verizon with a 50 percent off on their bills if they switch to Sprint.

T-Mobile has ditched its unlimited data promotion in favor of a capped data package priced at a premium compared with previous offerings, while AT&T continues to offer an unlimited cellular data option for the customers also selecting the company’s DirecTV package and Sprint also maintains an unlimited data plan promotion, which was launched by the telecoms in February and includes unlimited services across four lines for $150 per month. Amid this, Verizon Wireless continues to shun the unlimited cellular data path, with Verizon Communications CFO Fran Shammo recently stating the unlimited data model does not work in an LTE environment.

To conclude, while there are no speculations on the leading wireless carrier position in the U.S., held by Verizon, T-Mobile seems to be catching up fast with the company and has the maximum customer additions in the first quarter of the year. While AT&T has shown increase in revenue, the investments have tagged it down, when it comes to the profits. Sprint, though seeing additions in customer base, has suffered from promotional deal expenses, and is in the efforts to clear off the debts. The impending 600 MHz auction will add more benefits to the telecoms acquiring it.

Vina Krishnan
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