US telecommunications industry analyst, Jefferies, has been adjusting its estimates for the four national US carriers, AT&T, Sprint, T-Mobile US and Verizon Wireless, via a research note. The reason for the adjustment is because of the intense competition in the fourth quarter, which the analyst reckons reduced postpaid net gains for AT&T, Sprint and Verizon Wireless and retained the existing estimate for T-Mobile US. Of AT&T, Jefferies' estimates are that the postpaid subscriber gain is down to 319,000 from 449,000, citing the company’s focus on the DirecTV bundles, which the analyst believes will have reduced some customer interest. The company also included an anticipated loss of around 250,000 handsets in its estimate because AT&T is shutting down its 2G network. For Verizon Wireless, Jefferies expects America’s largest wireless carrier to have added 786,000 postpaid customers during the fourth quarter 2016 compared with previous estimates of 943,000.
It said that T-Mobile US’ preliminary 933,000 postpaid increase, announced during the Consumer Electronics Show, was “largely in line with expectations.” For Sprint, here Jefferies reduced its fourth quarter estimate to 410,000 net additions, down from 430,000. Away from subscriber numbers, Jefferies makes some interesting observations about the strength of the underlying businesses. To summarize, T-Mobile US are performing well but are paying for their customer growth with a reduced profit margin, even though the ARPU (Average Revenue Per User) figure is showing an increase to $48.89%, a 1.8% increase compared with the third quarter. T-Mobile is paying a lot of money to capture customers. Against this, Jefferies believes the other three carriers, AT&T, Sprint and Verizon Wireless have likely raised their profit margins despite the intense competition, but these companies are not paying so much to acquire customers.
The analyst made particular reference to AT&T, where it expects the carrier to improve fourth quarter earnings to $0.65 because it has cut operational costs - including of course the shutdown of the 2G network. Jefferies also adjusted the estimated churn figures for these three carriers, showing 1.17% for AT&T, 1.62% for Sprint, 1.03% for Verizon. From this data, T-Mobile US appear to be stealing more customers from AT&T and Sprint compared to Verizon. Jefferies also expects all four carriers to issue forward looking statements along with their fourth quarter results. AT&T, Sprint and T-Mobile US have all promised to deliver 1 Gbps LTE networks and all four carriers are investing into 5G technologies. We will know in the coming weeks if there are any surprises in the subscriber data.