AT&T is currently facing a significant challenge with rising customer churn, a clear indicator of underlying issues within the carrier. Churn is defined as the percentage of customers who switch providers or cease service during a specified time period, typically a quarter.
In its recent Q2 earnings report, AT&T disclosed that its postpaid phone churn rose from 0.70% to 0.87% year-over-year, marking a troubling increase. This uptick in churn complicates AT&T’s positive news regarding its acquisition of 401,000 new postpaid phone customers in the second quarter.
The rise in churn coincides with recent price hikes for AT&T’s unlimited wireless plans, which increased by $10 for single-line customers and by $20 for those with multiple lines. Furthermore, the monthly autopay discount was reduced from $10 to $5 for debit card payments, leading to concerns related to customer retention.
Despite these price adjustments, AT&T’s CEO John Stankey downplayed the significance of pricing in the churn issue, indicating that the company is attempting to tie price increases to perceived customer value. He acknowledged the complexities of pricing strategies but suggested that churn may also be influenced by other factors.
CFO Pascal Desroches attributed the increase in churn to a competitive market, a higher number of customers exiting financing contracts, and broader economic influences, including tariffs. He suggested that immigration policies might also play a role in the dynamics of the prepaid market.
Moreover, Stankey emphasized that any cost increases from tariffs would ultimately be passed on to customers, affecting pricing on new devices. This complex interplay of factors illustrates the competitive environment AT&T operates in and highlights the ongoing challenges manufacturers face as they seek to retain customers amid shifting market conditions.