Wells Fargo: Verizon, T-Mobile to lead in handset subscriber adds in Q4, outpacing AT&T's losses

Verizon (NYSE: VZ), T-Mobile (NYSE:TMUS) and Sprint (NYSE: S) will all report relatively solid postpaid subscriber adds in the fourth quarter, according to a forecast from Wells Fargo Securities, while AT&T (NYSE: T) will see a net loss in postpaid handset subscribers.

The results reflect the carriers' sales during the critical holiday shopping season. The carriers are variously scheduled to report their fourth-quarter earnings in the coming weeks.

Wells Fargo predicts Verizon will post 1.52 million overall net additions, including 844,000 smartphone subscribers. The nation's largest carrier will also report postpaid churn of 1.08 percent, Wells Fargo estimated, with wireless margins improving year-over-year to 37 percent to 32.6 percent.

Those additions aren't likely to stem from Verizon's marketing of its new video service, though, Wells Fargo said.

"VZ offered a promotional 2 GB of data to all subscribers who downloaded its Go90 mobile video offering, although it is unknown what impact that had to customer acquisition or retention. We do not think this was a major needle mover," the firm said.

T-Mobile is expected report postpaid net adds of 1.29 million, including 917,000 handset adds, and postpaid churn of 1.46 percent. The operator will also post $100 million in leasing revenue during the quarter, according to Wells Fargo estimates.

"These customer additions and churn numbers continue to be impressive, in our view, with TMUS capturing the overwhelming majority of postpaid handset growth," Wells Fargo noted. "The leasing program should expand significantly in 2016, when we expect a 35 percent take rate and $1.3 billion in leasing revenue."

And Sprint is projected to post 625,000 net adds including 300,000 handsets, as well as a postpaid churn of 2.1 percent, down from 2.3 percent during the fourth quarter of 2014. Its quarterly EBITDA of $1 billion will be hurt by $100 million in MLS financing costs, however. MLS (Mobile Leasing Solutions, Sprint's  handset leasing company) will provide Sprint with a cash infusion of $1.1 billion during the quarter.

Meanwhile, AT&T is expected to see its net loss of 300,000 postpaid phone subscribers offset by 500,000 net tablet adds. The operator will post strong EBITDA margins of 33.6 percent, Wells Fargo predicted, and a 1.1 percent churn rate.

And AT&T, which is widely acknowledged to be a leader in the emerging IoT space, should see its efforts there continue to pay dividends.

"We expect the prepaid side and connected device segments to show continued momentum as well," Wells Fargo said, generating 425,000 net adds and 1 million net adds respectively.

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