Thursday, February 7, 2019

4Q18 T-Mobile Prepaid Recovers A Bit

T-Mobile took back net additions leadership for the quarter amid a slowdown in 2017 and 2018 from monstrous growth in 2015 and 2016.  With 135K adds, the company beats continued prepaid nemesis AT&T which posted 26K but only 13K phone net additions


Why it Matters: 

T-Mobile needed to slow the AT&T prepaid momentum a bit as it has been moving towards prepaid leadership in terms of additions since 2Q17.  Were it not for AT&T branded prepaid losses, Cricket's 240K net adds would have continued AT&T's domination.  A quarterly win is a nice reversal of 2018 fortune.


It's no secret that postpaid has better revenue upside than prepaid and in the 3Q18 earnings call, President Mike Sievert explained that their focus had been converting competitors' prepaid users to T-Mobile postpaid.   Data point: Prepaid makes up 33% of its branded base and 30% of the revenue.

Despite how the company and others in the industry have been stating that the prepaid/postpaid plan lines have blurred, T-Mobile postpaid hovers at ~$46 while its prepaid ARPU is in the mid $38 range. So Mike's argument holds water. What is unique is that in 4Q, T-Mobile admitted that its gains were from lower churn but also plan and handset promotions.  The promotions are a sharp contrast to not responding to 3Q AT&T promotions.  Will T-Mobile by Metro continue its  promotional run or is the AT&T branded prepaid losses a quarterly anomaly? Though with the 4Q win, AT&T safely won the 2018 leadership. What will '19 look like?   

Thursday, January 31, 2019

4Q18 Sprint Prepaid Tanks

Just when you thought Sprint prepaid turned the loss corner in 2017, it started sputtering in 2Q18 and then totally tanked in 4Q19 with 174K net losses.  Sprint bet big on prepaid in the Dan Hesse days and embarked on a multi-brand strategy.  Then, Assurance, a lifeline brand created to counter America Movil's Safelink greatly added to the prepaid base. Then with the fallout of lifeline investigations, those numbers quickly went away. Meanwhile in 2017, under then CEO Claure, Sprint announced the re-launch of its limbo brand, Virgin Mobile.  The new Virgin Mobile was supposed to be an "industry game-changer" with an iPhone only bent. It hasn't moved the needle in prepaid competition.


Why it matters: Essentially, Sprint prepaid is a one brand pony - Boost.  In the CY4Q18 earnings call and material, Sprint noted that Boost continues to be a strong contender. In the previous quarter, Boost accounted for <200K net additions. For this quarter, rather than provide a definitive number, Sprint CEO Combes only stated that Boost delivered eight consecutive quarters before "migration."

Migration? What's that? In a nutshell, Sprint has identified high-value and stable Boost or Virgin Mobile subscribers and offer them a non-branded Sprint postpaid plan and device financing.  For this quarter they totaled 100K, which also classified them in the Sprint postpaid subscriber base.  

In CY3Q18, Combes managed expectations that this quarter would be negative.  One can only assume that Virgin Mobile is the brand that is in a freefall since Sprint no longer reports Lifeline (Assurance) subs due to regulatory constraints. However, Sprint expects a return to growth in CY1Q19/FY4Q18. Even if Sprint prepaid bounces back, it will be a while before it matches the momentum of AT&T Cricket or Metro by T-Mobile.

Wednesday, January 30, 2019

4Q18 AT&T Prepaid Momentum Stunted but Cricket is OK

After a monster run at huge net additions, the prepaid group somehow fell off a cliff. It's not a pretty sight, is it?  After its Leap Wireless acquisition, the company completed the acquisition in 1Q14, the company began to ramp up to expand the Cricket brand beyond the legacy region footprint.  T-Mobile's MetroPCS had a similar ramp in growth from 1Q15 to 1Q17.  By 2Q17, AT&T prepaid started taking the industry prepaid net add leader.  Therefore, AT&T 4Q18 prepaid numbers were a jaw dropper.


What happened:  Many industry watchers have become accustomed to Cricket as the net addition driving force.  However in the traditional cut-throat holiday selling quarter, promotions abounded.  Detailed in the earnings call Q&A, Chairman Randall Stephenson assured analysts that Cricket still had growth momentum with 240K net adds but the branded prepaid side suffered these losses. He pointed to two factors: 1) Branded prepaid subs were moving to competitors' postpaid and 2) AT&T did not want to counter a loss leading handset promotion (A $250 device was offered at $100).  As a result the prepaid phone net adds only amounted to 13K.  


Why it Matters:  While AT&T has been disciplined about not getting into promotions that hurt margin, it does impact the view that growth and competition is hurting them in the very visible net addition metric. It's likely that the AT&T branded prepaid loss could factor in the gains at T-Mobile, perhaps both pre and postpaid.  Unless the competition can sustain a loss leader strategy and Cricket growth stagnates, AT&T 1Q19 prepaid net additions should climb out of that cliff. Stephenson has noted glowingly in the past about Cricket's ARPU (~$35) being close to postpaid.  Prepaid has been a bright spot over the last two years of growth and revenue contribution, offsetting the declining and handcuffed postpaid side. With more of the same postpaid performance anticipated in '19, prepaid needs to get its mojo back.  




Tuesday, January 29, 2019

4Q18 Verizon Prepaid Continues Decline

Verizon prepaid has steadily lost subscribers over the many quarters. For 4Q18 the carrier lost 90,000 subscribers, 3K more than last quarter. This performance, on the surface, is disturbing for any student of business. In the 3Q18 earnings call, CFO Ellis stated, "..prepaid is certainly a small part of our business. And we will continue to evolve and adapt the product offering there over time."  The company was to focus the prepaid offerings on value-added segments. The 4Q18 results suggest it's either not working or still a work in process into 2019.




Why it doesn't matter: Verizon's retail subscriber base is now nearly 118 million subscribers of which the prepaid base is about 4.6 million. That's less than 4% of the overall retail subscribers.  Even though the prepaid group had been north of 5 million, the postpaid side is where the money is at.  In contrast, the postpaid subscriber net additions exceeded 1.2 million.  In the end for prepaid competition, Verizon as a brand, while strong force in postpaid is a non-contender in prepaid.    

Axios Type Posts Going Forward

When I spent time at my old company, Current Analysis, the value to the customer base on quick analysis was brevity and competitive impact. We wrote (at the time) very short but meaningful opinions and analyses on events (announcements, plan changes) on the competitive landscape.

Fast forward to 2019 and a news website has taken brevity to the extreme with similar goals but less words.  I'll try this format from now on....

   FTW