Analysts: AT&T beats back competition from T-Mobile in Q1

AT&T Mobility (NYSE: T) was able to withstand an onslaught of competition from T-Mobile US (NYSE:TMUS) and its other Tier 1 competitors in the first quarter, according to predictions from Credit Suisse analysts.

According to Credit Suisse, T-Mobile is expected to be the winner among Tier 1 wireless carriers in terms of net subscriber additions for the quarter. Since January, T-Mobile has been offering customers up to $650 to pay off their Early Termination Fees if they switch to T-Mobile and trade in their phones. The analysts expect that offer to have significantly boosted T-Mobile relative to its competitors.

Still, AT&T managed to acquit itself quite well, according to a research note from Credit Suisse analysts Joseph Mastrogiovanni, Henrik Herbst and Michael Baresich. "We expect a solid quarter from AT&T despite pressure from TMUS's ETF promotion," they wrote. "Our checks indicate that while AT&T felt some pressure from T-Mobile, it performed fairly well against [Verizon Wireless (NYSE: VZ)] due to its improving network and more competitive pricing." The analysts think AT&T added 200,000 postpaid subscribers in the quarter compared to a prior estimate of 150,000. In the year-ago period, AT&T had 296,000 net postpaid subscriber additions.

The analysts also think that AT&T's Next handset upgrade program accounted for 22 percent of all device sales in the quarter. AT&T executives have said that Next is becoming increasingly popular.

AT&T will be the first major wireless carrier to post its first-quarter earnings when it reports financials today after the market closes.

In their report, the Credit Suisse analysts think T-Mobile added 1.05 million net postpaid subscribers in the quarter, 250,000 more than they originally thought "due to what we believe was stronger than expected take rates of T-Mobile's ETF refund. Based on our checks, we believe T-Mobile saw better penetration of ETF refunds than we expected with significant strength early on followed by momentum moderating toward the end of the quarter," they wrote. However, taking on those customers likely cut into T-Mobile's EBITDA, they noted.

At Verizon, the analysts think the nation's No.1  carrier "started to feel the pressure of competition" in the first quarter, especially from T-Mobile's ETF offer and AT&T's cut in shared data plan pricing for families. "However, Verizon's quick response (to AT&T) helped lessen the impact in the latter half of the quarter," they wrote. Credit Suisse expects Verizon to report 525,000 net postpaid subscriber additions, which would be Verizon's second-lowest quarterly figure in the past 16 quarters, they noted.

As for Sprint (NYSE: S), the Credit Suisse analysts wrote they "remain cautious on Sprint going into first quarter results, as we continue to believe Sprint lost share of phone subscribers."

The analysts expect Sprint to have lost 250,000 postpaid subscribers in the quarter, and that higher churn of 2.05 percent cut into Sprint's EBITDA. However, they also think Sprint's Framily plans and tablet activations helped offset some competitive pressure. Sprint introduced its Framily plans in January; the plans encourage families and other groups to add customers to Sprint by providing discounts for new lines of service.

"Framily plans and tablets helped offset competitive pressure. Based on our checks, we believe Framily plans had some limited success as Sprint customers recruited Framily members over social media and in stores," they wrote. "Sprint's promotional pricing on tablets also drove sales that helped offset weakness in handset subscriptions from T-Mobile's ETF reimbursements plans and AT&T's and Verizon's price adjustments."

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