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T-Mobile & Sprint Struggling To Make A Profit From Customers

November 23, 2015 - Written By Muni Perez

You may have heard a lot about T-Mobile lately, as the company has dominated the headlines with their disruptive plans to attack the competition. Although their strategy seems to be working pretty well in terms of net subscribers, getting 2.1 million new customers in Q3 2015, the two bigger rivals are still far, really far away from the reach of T-Mobile, as a recent study conducted by industry analyst Chetan Sharma shows that both AT&T and Verizon had a significant higher earning over T-Mobile and Sprint, as each company’s strategy results are being revealed with their respective financial statements.

The study shows that, while AT&T and Verizon have optimized their businesses to keep their machine running with their huge amount of subscribers, T-Mobile and Sprint have focused on acquiring these subscribers, which is a quite an obvious move if they want to grow. However, in order to get more customers they need to lower prices and make special promotions. As a result, both Verizon and AT&T earned $17 per subscription per month. T-Mo and Sprint, on the other hand, presented a loss of $0.39 for each subscription, per month, lagging far behind. While Verizon had a profit margin growth to 56.4% from 49.5%, and AT&T upped from 43.1% to 49.4% year-over-year for both companies, Sprint skidded with a net loss of $585, which is better than the $765 loss they reported last year, but still more than half a billion dollar loss. T-Mobile, on the other hand, had a better quarter, with a net income of $138 million for Q3 2015 against a $94 million loss in the same quarter of 2014.

As for the number of customers, there were 7.2 million new connections overall, between post and prepaid lines. The 3 largest carriers added more than 2 million new customers each while Sprint had only a fraction of that. As mentioned before, T-Mobile alone got 2.1 million new customers and 1.085 of them were postpaid subscribers, the fifth quarter in a row the company is adding more than 1 million new postpaid customers. Verizon led the way having attracted 1.3 million postpaid customers. However, most of Verizon new subscriptions were tablets, which are not so profitable as phones. T-Mobile got most new phones with 843,000 new postpaid lines activated, about double what Verizon did and more than any other carrier. Sprint had a shy 237,000 addition and AT&T lost 545,000 phone subscribers. This last number is interesting because the company says these were feature phones.

It will be interesting to see how things will go in the coming quarters. T-Mobile is still betting high in order to get more customers and they have recently unveiled an unlimited video streaming feature, which raised concerns about network congestion, video quality and even Net Neutrality.