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Sprint’s Churn to Increase in Q1 2016, Says Wells Fargo Analysts

March 16, 2016 - Written By Alexander Maxham

Sprint, who is currently the fourth largest carrier in the US, has been struggling in the past few years to turn a profit, but to also keep their customers and reduce churn. Churn is an important metric in the wireless industry, as it measures the number of customers that are coming to the carrier versus those that are leaving. Ideally, the lower churn you have, the better off you’ll be. The first quarter of the year is always a tricky one for wireless carriers. The reason being is that there aren’t many smartphone launches happening between January and March, and many customers upgraded during the fourth quarter, when all of the holiday deals were happening.

While the first quarter has been pretty slow, as usual, Wells Fargo analysts believe that it’s going to be even tougher on Sprint due to T-Mobile’s aggressive promotions and marketing in the quarter. Making it expensive for their competitors like Sprint to add customers. The analysts also believe that Sprint’s churn is going to increase in the first quarter of this  year, and that’s partly due to the company focusing on “quality” subscribers, or more lucrative subscribers. These quality subscribers are important to companies like Sprint, as it means more cash coming in from less subscribers. While Sprint and T-Mobile have both been adding tons of customers lately, more so T-Mobile than Sprint, they have mostly been those less lucrative subscribers. Meaning that they are adding people, but not making a ton of money off of them.

Now with Sprint focusing on adding these lucrative subscribers in the quarter it is going to affect churn, however they believe it will help out Sprint in the long run on their bottom line. Sprint’s income in the last few quarters haven’t been that great. In Sprint’s third fiscal quarter of 2015, the company posted the best postpaid net adds in over 3 years. However despite adding over half a million postpaid customers, they did post a $197 million loss for the three-month period ending on December 31st, 2015.

Having said that, analysts were expecting Sprint to post a churn of 1.55 in the quarter ending this month, but they have now raised that to 1.75. Which is actually still rather low for Sprint, as they’ve recently posted churn rates of over 2 in the past couple of years. And as stated before, this focusing on quality subscribers in their “half off” promotion should definitely help their bottom line in the long term, at least according to Wells Fargo Securities Analysts.