Tuesday, May 14, 2019

CY 1Q19 Sprint Prepaid: Another Down Quarter & Stealing for Postpaid

Sprint prepaid has recovered from the previous quarter's 173,000 net losses with only 14,000 losses in CY1Q19. Statistically, they seem to be on the mend.  Sprint management has continually citing Boost Mobile's performance and doing heavy competitive lifting against stronger competitors Metro by T-Mobile and AT&T's Cricket.  It's no surprise that some T-Mobile and AT&T's net gains came from Sprint prepaid losses.  



However, this is disingenuous as Sprint's prepaid numbers should have formally shown better results.  There has been an on-going assignment of better performing (stable paying) subs to Sprint's non-branded postpaid category, thereby enhancing the postpaid number count. For CY1Q19, prepaid to postpaid migrations totaled 129,000.  On the postpaid side,  the company lost 189,000 phone subs. Without that 'help' from prepaid, the postpaid optics would have worse. Back in CY4Q18, with 173,000 prepaid losses, 107,000 migrated to the postpaid bucket. Then, Sprint posted 26,000 postpaid phone net losses. So the take away is that while prepaid performance is bad, postpaid is in rougher shape without its prepaid unit. 

By no means is Sprint the only carrier using prepaid to postpaid migration accounting to help its postpaid optics. T-Mobile is also expanding its postpaid numbers with this approach, piling onto the string of phenomenal postpaid growth quarters.  For 1Q19, 120,000 prepaid migrated to postpaid. What's important here is that they would have beaten AT&T for the 1Q19 prepaid title if they didn't do the migration. These migrations allowed T-Mobile to report 656,000 net phone adds. In 4Q18, there were 160,000 prepaid to postpaid which allowed T-Mobile to break one million phone net add mark.  Optics is everything in pushing your message.

Looking at churn, Sprints low 4% churn is highest of the big four prepaid competitors. T-Mobile is at 3.85% and America Movil is at 3.7% in the quarter and AT&T's Cricket reported to be sub 3%. On the other end of the spectrum, the non-competitive Verizon prepaid unit has continually lost prepaid subs and doesn't report its churn.  Churn has a lot to do with volatility or stability of the operating unit.   

Why it matters:  Without prepaid to postpaid migration accounting, Sprint prepaid appears to be staying somewhat lockstep against competitors in acquiring customers.  Since this accounting practice has been in place for many quarters, it's likely that prepaid numbers will continue to assist any Sprint postpaid 'recovery.'

There has been continuous talk about T-Mobile and Sprint shedding its prepaid assets as one or one of several conditions of regulatory approval.  It's no surprise, if that is the case, that Boost is the sacrificial lamb with its 8.8 million subs versus the more successful T-Mobile's 21.2 million.  T-Mobile can argue that they can keep its own prepaid unit as a counterweight to America Movil's 21.6 million count.  America Movil management has also publicly stated that they'd be willing to look at adding subs from any merger shedding. However, that would put them squarely ahead as the prepaid giant with close to 30 million subs.  How well would those optics look?  Yet with all this conjecture, we won't know until a decision happens in June or July.

   

Tuesday, May 7, 2019

1Q19 America Movil USA Prepaid – Recovering and Shifting

America Movil with over 21.6 million subscribers is the largest US prepaid player in 1Q19, closely followed by T-Mobile (21.2M), AT&T (17.2M), Sprint ([CY 4Q18] 8.9M) and finally Verizon (4.48M). With many prepaid operating brands absorbed throughout the years and the backing of its Mexican-based parent, the company is still a prepaid force but has ceded prepaid leadership to AT&T and T-Mobile.   To put it in perspective, America Movil USA reached its corporate high of over 26 million subscribers in 4Q14.

Similar to Sprint, its bet on lifeline services (SafeLink) has punished its subscriber base count with continued losses.  Partially offsetting this downward pressure has been the shift from non-recurring plans, such as pay as you go, to higher ARPU bearing monthly plans.  Chiefly, Straight Talk (available at Walmart  and ~43% of its overall base) has been its growth engine for many quarters while the other brands have declined. To understand the significance of Straight Talk and SafeLink, the two are highlighted in quarterly earnings reports along with an Other Brands category (~44% of the base).  

For the quarter, there seems to be a recovery of sorts, relative to the big losses in 2017 and 1H18.  With only 89,000 net losses, the company contrasts that to 1Q18's 371,000 losses and 1Q17's 1.3 million. The focus on the higher-ARPU bearing Straight Talk with 175,000 additions has helped its ARPU rise for the quarter to $26, contrasting to 1Q18's $24, 1Q17's $23 and 1Q16's $21.  Another provided metric, churn is now at 3.7% where in previous quarters were north of 4%.

Why it Matters: From the above chart, the truly bad days seem to be behind the company but SafeLink will likely continue to contribute to the losses. Though losses are less for the quarter, the US business unit's EBITDA margins is a measly 6.2% compared to the high 20s to low 40s of other America Movil's business units. Also, rewinding four years, the US business unit's 1Q15's EBITDA margin was 11.7%.  This suggests that it's been a truly competitive prepaid environment and the biggest MVNO is just getting by. 

There have been suggestions that America Movil may be in a position to acquire a spun off Sprint prepaid unit as a possible condition of a T-Mobile/Sprint go-ahead. America Movil management has indicated receptiveness to that as buying companies to increase the US opportunity has always been in the playbook. By no means are they the default winner as there are other parties vying for a parted out Sprint prepaid unit, if the occasion arises. We'll know in June/July?

Friday, May 3, 2019

1Q19 T-Mobile Prepaid -– Slipping and Sliding in the Postpaid Shadow


T-Mobile has outperformed its rivals for many quarters. Postpaid growth has been its consistent flagship that many focus on. To complement the postpaid rocket ship, MetroPCS’ expansion perhaps put the cherry on top. Today, postpaid is still growing but prepaid has been slipping since 2Q17, when AT&T prepaid pushed ahead. Throughout the quarters, questions were asked about why prepaid has slowed. Many times, the corporate answer is that the lines are blurring between prepaid and postpaid. However, T-Mobile had made it easier for those who were deemed less than prime customers to access postpaid plans, thereby adding them to the postpaid count.  Those prepaid to postpaid migrations have been highlighted consistently for many quarters. We all get it, postpaid customers bear higher revenue, they tend to churn less and more are more stable.  To be sure, the goodies of T-Mobile Tuesdays and free Netflix are also nice value draws.

Still, prepaid to postpaid migration takes away from the Metro by T-Mobile subscriber base and its posted revenues.  With this, there has to be tension between Dallas-based Metro (and its dealers) and corporate in Seattle.  The halcyon monster growth quarters from 2Q15 to 1Q17 are over while postpaid continues its march. In 1Q16, the prepaid group posted a record high 807,000 net adds but in 3Q18, it had dropped to a low of 35,000.  By the way, at the end of that quarter, Metro by T-Mobile rebranding was rolled out.   Perhaps reinforcing MetroPCS was T-Mobile would help.    4Q18 was ‘okay’ but 1Q19’s 69,000 contrasted starkly against 1M+ postpaid net adds. To add salt to the wounds, 120,000 net prepaid customers migrated to branded postpaid.


Is the prepaid group slipping?  From the growth view, yes. Yet the argument in a decreasing churn trend could be pointed as progress. In the last 4 quarters, the highest churn at 4.12% (3Q18) has dropped to 3.85%, lower sequentially (3.99%) and even YoY (3.94%).  That’s progress, right? BUT, AT&T’s Cricket Wireless is sub 3%, an astounding feat for prepaid. 

However, ARPU has slipped to $37.65 from $38.90 YoY and also sequentially.  Some can argue this is inconsequential yet from an overall prepaid revenue contribution, 1Q19’s $2.38B contrasts with 1Q18s $2.4B.  But postpaid continues to deliver with upward trends in net additions, revenue and low churn. 

Why it matters:  Perhaps the company is paying attention.  There is that thorny prepaid group integration task if and when the Sprint acquisition happens. To that end, longtime MetroPCS head Tom Keys is moving out of that role to work on the integration and transition task. After that, Mr. Keys will be retiring (likely with a non-compete).      Metro staff will have  new corporate EVP bosses in the form of Jon Frier (sales) and Matt Staneff (marketing) based in Seattle.  This is a rub for dealers as they’ve had deep and trusting relationships with the Dallas-based Keys.  How will their voices be heard when these EVPs have a bigger ball of wax to run, given the corporate focus on postpaid?   

Dealer performance and happiness in the end affects T-Mobile’s prepaid numbers.  T-Mobile corporate will have to navigate their distribution’s discontent and concern in making or losing money.  Presumably Mr. Keys will advocate for the brand that he has helped built and we shall see what develops.  Will Seattle drive new prepaid (non-loss leader) promotions to bring the prepaid group back?  We shall see. 

Afterthought: What if the Sprint deal fails? What will Tom Keys do and will the Dallas to Seattle reporting and control structure remain in place?



Tuesday, April 30, 2019

1Q19 AT&T Prepaid Returns to the Pole Position

Last quarter, AT&T ceded its prepaid net add position to T-Mobile. AT&T had led five out of the last eight quarters.  With the acquisition Leap Wireless and its Cricket brand, AT&T slowed the MetroPCS juggernaut that had been dominating the prepaid sector since T-Mobile bought them. Both companies had a similar playbook, de-commission the old CDMA network and expand brand and distribution beyond the old regional footprints.  For people playing wireless industry Trivial Pursuit, MetroPCS’ kickoff expansion was coined “Apollo 15.”  To put it in a competitive context, from 1Q15-4Q18, AT&T and T-Mobile accounted for over 10 million net additions while competitors were in negative territory.  

Company
Prepaid Net Additions / Losses
AT&T
5.24M
T-Mobile
5.14M
Sprint
-1.66M
Verizon
-1.48M
America Movil
-4.33M

Fast forward to 1Q19 results, we find that even with 96,000 net adds (85,000 were phone net adds), AT&T won out against T-Mobile’s 69,000.  This is a recovery of sorts against a shocking 4Q18 in which AT&T seemed to have lost its growth mojo


Looking at the drop in growth seems somehow disturbing after so many go-go quarters.  Is prepaid plateauing, especially since all other prepaid competitors have loss subscribers (Sprint hasn’t reported yet as of this writing)?  It may be but there are some silver linings: 1) Some solace for the prepaid group as their 85,000 phone adds beat their postpaid brethren.
2) In his prepared remarks, Chairman Stephenson reiterated the company’s strategy to focus on the high-value prepaid segment but divulged (for the first time in my recollection) that Cricket had its lowest ever quarterly churn rate of less than 3%, down more than 60 basis points year-over-year. Prepaid revenue growth was solid, up more than 6%. We now have more than 10 million Cricket subscribers, double what we had when we acquired the company in 2014 with more than 17 million total prepaid customers under the umbrella of AT&T.”

Why it matters:  Chairman Stephenson’s unveiling of prepaid metrics (prepaid churn and ARPU are not publicly available metrics) suggest tremendous stability in the Cricket base.  For long-time industry watchers, prepaid churn ranged in the mid 4% to 5%. Therefore, churn less than 3% is a tremendous achievement. Moreover, stating there are over 10 million Cricket subscribers since the 2014 acquisition, out of the over 17 million prepaid base gives context on Cricket’s explosive performance.

Growth and acquiring switchers is an expensive game. For 4Q18 earnings, AT&T cited a competitor’s loss-leading handset promotion which took a toll on its branded prepaid. With its debt paydown targets from the Time-Warner acquisition, the company is unlikely to respond to any loss-leading promotion. This has been articulated in both the prepaid and postpaid side. As a result, explosive growth may not be on the horizon in the near term, barring extreme competitive circumstances. 

Caveat: If postpaid distribution will expand under FirstNet, prepaid may ride its coat tails.

Monday, April 29, 2019

1Q19 Verizon Prepaid – Sustained Losses but It’s OK?

It’s almost like a broken record that the Verizon prepaid group continues to lose subscribers quarter after quarter. In fact,  the company has lost subscribers for the last six quarters. In tracking over 17 quarters, 14 have been losses.  



Here’s the breakdown for year ending:

2015 – 551,000
2016 – 133,000
2017 – 43,000
2018 – 757,000

These for years total over 1.48 million lost subscribers.  Add 1Q19’s 176,000 losses and the tally is over 1.6M. In late January, following the Verizon earnings call, I noted these continued losses and CFO Ellis then paid lip service to note that they’re going to evolve their offerings over time. For this quarter, CFO Ellis noted that the quarter’s losses were better than 1Q18’s -355,000, seemingly putting a "it's not that bad" spin on things.  The party line had always been allowing the shedding of low (profit) and price sensitive customers with the retention of high-value monthly plan subscribers who don’t mind paying premium for the Verizon brand/coverage.  That thought is also goes hand in hand with migrating the voice/text phone-only people off or help transition them to smartphone plans.

Why it still doesn’t matter: Verizon is first and foremost a postpaid company with marketing and retention dollars better served on the postpaid side. Prepaid is highly contested as two  players have dominated prepaid over last 3 years years, AT&T (Cricket) and T-Mobile (Metro by T-Mobile). The two have taken the lion’s share of the prepaid net additions and they will continue to do so as their distribution into non-urban areas expand.    At the end of 1Q19, Verizon’s retail base was close to crossing 118M.  The 4.48M prepaid count is just 3.8% overall. Then there’s the revenue.  If Verizon’s prepaid ARPU is in mid-high 30s and its postpaid ARPA in the $130s (no apples-to-apples, I know), one can see why prepaid just isn’t a huge priority.     

Monday, March 25, 2019

2019 Prepaid - What Do Trends From Previous Years Say?

1Q19 Earnings season is about a month away.  Postpaid gets much of the focus because it brings in revenues and because it's a big chunk of the bread and butter revenue of many carriers.  However, though prepaid is a minor asterisk on many carriers, it doesn't mean that competition isn't just as formidable.

Trends could be a good predictor of future performance.  For every earnings call, I try to display a couple of years worth of net additions or losses on Twitter and occasionally, I write a blog or two. Let's look at the previous years' aggregate results and see if anything is interesting.

2017


It's clear the biggest loser was America Movil (Tracfone) as a huge loss factor was the lifeline brand, Safelink.  Tracfone was once a huge prepaid force to be reckoned with and to be fair it still is.  At the end of 2017, it had over 23 million customers.

Verizon didn't have a bad 2017. As the company is over 90 some odd percent postpaid. It didn't seem like a huge impact, as the carrier stated its intent to move feature phone subs off its 3G network and onto higher ARPU bearing smartphone plans.

Sprint looked like it was recovering and turned the corner from abysmal years '15 and '16 due to Assurance Wireless losses, their lifeline brand.  The Sprint prepaid group's flagship Boost Mobile continued to contribute as Virgin Mobile seemingly didn't help the cause.

Lastly, the T-Mobile and AT&T fight was the most competitive.  The real story behind those two companies' momentum is the respective purchases of regional players MetroPCS and Leap Wireless (Cricket).  T-Mobile dominated all of '15 and '16 as it expanded its distribution doors beyond the MetroPCS footprint.   AT&T used the same playbook in revamping and expanding Cricket's distribution nationally. Within the weeds, 2Q17 was the inflection point in which AT&T led for the remainder of the year.   This is important as AT&T and T-Mobile are emerging as the dominant prepaid forces.

2018


America Movil continued to lose!  Persistent blame was cast on its lifeline brand.  Corporately, it appeared an underlying industry strategy was to embrace the higher ARPU bearing and flagship Straight Talk brand for sub growth and revenue.  Straight Talk now makes up ~9.1 million out of its overall 21.7 million base.  The higher ARPU strategy yielded positives as its overall corporate end of year ARPU hit $26 vs '17's $24 vs '16's $23.  In addition, the overall corporate churn trend continues to improve.

While Verizon '17 prepaid looked encouraging, '18 saw significant prepaid losses.  Its sub base is barely 4 million and while there are some who point to the semi-linked Visible brand to address its prepaid ambition, it's a tough and price sensitive market.    

Sprint was supposed to have turned the corner in '17 but you would have been wrong for '18. 1Q18 saw some good momentum but in the end, 4Q18 tanked.  Clearly Sprint is more focus on good postpaid numbers, as it even categorized some Boost Mobile users with a good payment record and moving them into the overall postpaid count.

Again, the AT&T and T-Mobile dynamic proved to show the most interesting outcomes, as the two continue to battle it out for growth. Throughout '18 prepaid adds slowed with T-Mobile claiming that the prepaid-postpaid lines have blurred significantly.  There are a combination of factors perhaps, like any competitor, the carrier would rather spend its resources into higher-ARPU bearing postpaid users AND AT&T's Cricket has put the competitive screws on Metro by T-Mobile.  The big BUT is in 4Q18 where unexpectedly, T-Mobile came roaring back, besting AT&T. With its positive momentum, AT&T should have dominated 4Q18 but its branded prepaid tanked the numbers.    Still, overall in '18 AT&T was the net prepaid winner.

2019?

With abundant losses behind it, America Movil may cross into positive territory in 2019 as its losses were ~100K in 4Q18.  The first quarter trend for each year typically carries over some of the 4Q momentum.  If that is true, then American Movil may potentially see '19 as a turnaround year, barring overwhelming competition.  The increasing ARPU trend should continue as it's likely the company will add more resources into getting more Straight Talk traction.

Though Verizon 4Q18 losses only amounted to 90K, nearly 600K of its overall '18 losses happened in 1H18. Seemingly, it could be on the upswing.  Yet, the jury is still be out as Verizon doesn't really seem to address its offerings competitiveness to grow or retain its prepaid base.

Sprint is a big unknown.  Through earnings calls, filings and market looks, Boost Mobile seems to be holding its own while Virgin Mobile is a non-contributor.  The trend is negative as Sprint, which once was a significant prepaid player is inconsequential as far as marketshare.  All the indicators are going in the wrong direction, their churn is up and their prepaid ARPU is declining.

The growth money still in on AT&T's side as its prepaid momentum is greater than T-Mobile's.  If one extracts the 4Q18 glitch, AT&T continues to be the growth leader, barring additional AT&T branded prepaid losses.  The bottom line is that both companies would continue to shape 2019 prepaid growth.

Finally, here's how the prepaid business units shape up versus the overall branded base to note who is shrinking and contracting.
       

Tuesday, February 26, 2019

Sprint's 5G Launch Potentially Gives It the 'Yellow Jersey"

At Mobile World Congress, Sprint announced its intention to launch 5G in May  with initial markets in Chicago, Atlanta, Dallas and Kansas City, along with Houston, LA, NYC. Phoenix and Washington, DC.


In support of the 5G foray, the company has lined up vendors to create and make available complementary halo devices LG (V50 ThingQ 5G), Samsung (Galaxy S10 5G) and HTC (5G Hub).   

The big picture: Sprint is finally realizing the advantage of its 2.5 GHz spectrum. While most of rivals were deploying LTE with FDD spectrum, Sprint's 100+ MHz TDD is a blessing as it can use that same wide bandwidth dynamically (split mode) to serve LTE and 5G. Therefore, it can add more downlink where market conditions require in contrast to a defined chunk of bandwidth as in competitors' FDD modes.

  • On the technology side, Sprint has been very vocal about investing in Massive MIMO radios and antennas, either when upgrading existing sites or building new ones. This technology is foundational as a 5G enabler and is ramping up in the first 5 months of 2019.  
  • Sprint's LTE Advance should be well over 220M POPs covered. But in late 2018, the company claims 225 gigabit LTE cities. This is important as it can provide a similar customer speed experience along side 5G. 

Why it matters:  To take a page out of the Tour de France where the leader wears the 'yellow jersey' as the winner in the stage, the 5G race seems to line up with Sprint.  While larger competitors AT&T and Verizon are deploying fatter mmW spectrum for fixed and quasi mobile service, it's unclear how they will get a national 5G footprint (It can bring in its discontinued 3G spectrum).  T-Mobile is banking on its FDD 600 MHz to provide the national coverage layer that could win the 5G geographic race down the line but it currently is still deploying and waiting for television station clearing. Moreover, it's unclear how much of its limited spectrum that it shares with LTE can provide a meaningful 5G experience. 

To be sure, Sprint's 2.5 5G coverage cannot provide a fully filled-inn national map. Physics makes it just too expensive to do so. However, using the 2.5 GHz in already built out markets and Massive MIMO upgrades along with the trend of vendor modularity (software and 5G 'cards'), Sprint can provide more 5G POP coverage than competitors in 2019.  
Tour de France observers will note that the race is multi-stage and with each stage there could be different leaders wearing the yellow jersey.  For now, in the first stage of the domestic 5G, it's looking like Sprint.

Extra content: John Saw, Sprint CTO at Mobile World Congress 2019 talking about its 5G network plans.

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