AT&T’s good times to continue in Q1: analysts

AT&T store
Some expect AT&T to gain more postpaid customers in the first quarter. (Mike Dano/FierceWireless)

A handful of Wall Street analysts expect AT&T to continue to gain customers throughout the first quarter, thanks largely to the operator’s “aggressive” buy-one, get-one promotions. That view runs counter to most expectations that AT&T will report a net loss of postpaid customers during the period.

“In Q1 T leaned into some aggressive postpay promotions in Q1,” the analysts at Wells Fargo wrote in a note to investors this morning. “What was perhaps most interesting was that most promotions dropped the bundled TV requirement from its BOGO offer on 1/12 and kept it throughout the quarter. We believe that by not requiring TV bundle with its BOGO offer, T likely saw an outsized share of gross adds and switchers in Q1.”

Indeed, as research firm Wave7 recently noted in a report, AT&T continues to offer a BOGO on most high-end smartphones (including the iPhone X in one market) and importantly is not requiring customers to sign up for TV service to obtain the promotion.

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Partly due to the strength of AT&T’s BOGO promotions, the Wells Fargo analysts said they are raising their first-quarter expectations for AT&T’s postpaid net customer additions into positive territory. The company said it previously expected AT&T to lose 150,000 postpaid phone customers in the first quarter but now thinks the carrier will gain 70,000 of those customers during the period. The company noted that most Wall Street analysts still expect AT&T to lose around 47,000 postpaid customers during the quarter.

But the Wells Fargo analysts are not alone. This week, the analysts at Deutsche Bank also raised their postpaid expectations for AT&T to a gain of 34,000 customers in the quarter, up from a loss of 75,000 of those customers in the period. “The company sounded more positive on Wireless, noting: (1) expectations for service revenues to return to yoy growth in 2H18 (and grow for the full year, pre-accounting standard changes); note AT&T has not seen yoy growth since 1Q14, and (2) record-low postpaid phone churn has supported increased margin re-investment into customers (citing greater focus on regionally targeted promotions more recently),” the analysts wrote this week. “We note AT&T has recently raised pricing on multi-line unlimited plans, indicative of a healthier pricing backdrop.”

Added the Wells Fargo analysts: “While Q1 tends to be a seasonally slow one for most carriers, we believe the recent promotions which T ran were done with a greater intention of just protecting its base (and keeping churn low) but, to also stimulate gross add activity.”

RELATED: Big 4 wireless operators to return to service revenue growth in Q1

Interestingly, the Wells Fargo analysts also said they disagreed with a recent assessment on AT&T provided by T-Mobile’s CFO Braxton Carter. Carter said this month that he believes that in the fourth quarter AT&T focused on a new, localized BYOD strategy that sucked prepaid customers away from T-Mobile, partly due to AT&T’s lower BYOD credit standards. However, the Wells Fargo analysts said they didn’t find evidence of this claim: “If this were the case – we believe BYOD adds would have materially increased. However, T’s BYOD subs declined 14% yoy for all of 2017 and 4% yoy in Q4’17,” they wrote.

Added AT&T in a subsequent statement on the topic: "T-Mobile’s comments about our fourth-quarter postpaid phone subscriber growth are misleading. We’ve offered our customers a BYOD option for years. We haven’t made any meaningful changes to our credit policies in quite some time, and when we do make changes, we disclose them in our SEC filings."

Article updated March 23 with a statement from AT&T

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