U.S. telecom behemoth, AT&T Inc. (T - Free Report) is undertaking initiatives to attract a broader set of customers by bundling its wireless and video services. The company is targeting customers who purchase a combo of wireless and video services. While doing so, AT&T plans to not only put a check on the postpaid churn rates but also plans to boost revenues from its wireless business.
AT&T currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Bundled Wireless-Video Services
AT&T is extending its free HBO offer to all its new and existing wireless customers on its Unlimited Choice plan. Effective Sep 15, the company will offer HBO for free to wireless customers who have subscribed to $60 a month Unlimited Choice plan. For an additional $10, they can livestream 60 channels and access 25,000 on-demand titles with DirecTV Now’s “Live a Little” video package.
For current video service customers paying for an HBO subscription through one of the company’s services, AT&T will include the channel free of charge. Wireless customers who are not subscribed to any AT&T video service can also access HBO through the DirecTV Now or HBO Go apps.
AT&T also plans to offer additional service bundles for this segment. However, the company has not yet provided any specific numbers on how much of its wireless and video customer base are bundling services.
In April 2017, AT&T bundled a subscription of HBO with its Unlimited Plus wireless service at no extra cost. Prior to this, AT&T also chalked other promotional offers, providing free access to HBO for a year on its over-the-top (OTT) online streaming service, DirecTV Now.
Meanwhile, AT&T is in the process of acquiring HBO's parent company - Time Warner Inc. (TWX - Free Report) . The pending deal has been approved by antitrust officials in 17 countries and is still waiting for the same from Brazil and the United States. The deal is currently under review by the U.S. Department of Justice, which will scrutinize the planned merger thoroughly and assess its impact.
Similar bundle deals are becoming common among telecommunication companies. Recently, T-Mobile US Inc (TMUS - Free Report) , the national provider of mobile communications services, recently announced the inclusion of online video streaming service provider, Netflix Inc. (NFLX - Free Report) in its unlimited postpaid wireless service, T-Mobile ONE.
Post-paid churn is one of the most important metrics in the wireless industry. It denotes the percentage of subscribers in a given time frame that cease to use the company's services for one reason or another. Post-paid subscribers are the largest revenue segment for major domestic wireless telecom companies. They have a significant lifetime value for these companies. The lower the churn rate, the better the outlook is for the company.
As a result of these bundling efforts and several low-priced service plans and promotional moves, AT&T claims to have reduced its post-paid churn rates evident in second-quarter 2017 results. Notably, AT&T reported postpaid phone churn of 0.79% in second-quarter 2017 compared with 0.90% and 0.84%, in first-quarter 2017 and second-quarter 2016 results, respectively. Total postpaid churn reduced to 1.01% from 1.12% in first-quarter 2017.
Hence, postpaid churn is used as a key indicator for wireless telecommunication companies. Investors interested in telecommunication companies are advised to follow their respective stocks’ postpaid churns for better return.
AT&T has not been performing well of late. Over the past month, shares of AT&T have declined 5.9% compared with the industry’s fall of 6.2%.
Moreover, when compared with the market at large, the stock’s performance is pretty dreary, as the S&P 500 Index has rallied 0.8% over the same time frame.
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