Once AT&T's acquisition of Leap Wireless closes in the first quarter, the carrier is planning to be aggressive in the prepaid market and ramp up its contract-free smartphone base.
Speaking on the company's fourth-quarter earnings call, AT&T Inc. (NYSE: T) CEO Randall Stephenson devoted a lot of time to talking up the carrier's prepaid plans, a first for it as it's usually focused on the more lucrative postpaid market.
The carrier actually lost 32,000 prepaid subscribers in the fourth quarter, which it attributed to tablet subscribers, but Stephenson assured analysts that things will be different once its acquisition of Leap Wireless closes in the first quarter. The CEO said his research into the small, contract-free carrier has shown off the strength of its customer-facing brand, Cricket Communications, so much so that AT&T will shut down its own prepaid brand, Aio Wireless, when the deal closes. (See AT&T to Acquire Leap Wireless for $1.19B.)
With more than 93% of its postpaid customer base now using smartphones, AT&T also plans to look to the prepaid market for future smartphone growth. The carrier did manage to add more than 230,000 prepaid smartphones to its network in the fourth quarter, giving it a base of more than 2 million prepaid smartphones. ARPU for these customers is more than 70% higher than the non-smartphone prepaid base, Stephenson said. (See AT&T's Device Mix Shifts Away From Postpaid.)
"You'll see us get most competitive moving into the value space with the Leap acquisition and using the Cricket brand," Stephenson said when questioned about AT&T's response to the competitive environment created by T-Mobile US Inc. "We'll be very assertive and aggressive on pushing smartphones on prepaid," he said.
The AT&T boss didn't offer much detail about what he had in store for Cricket, mainly repeating that putting the Cricket brand on top of the AT&T network has the potential to shake up the prepaid industry. He did, however, note that there is more wiggle room for lower prices using the Cricket brand, because it wouldn't affect the core of AT&T.
As for its core network, the carrier is also ahead on its LTE network deployment plans, currently covering 280 million people with plans to reach 300 million with the 4G network by this summer. (See AT&T Adds 12 LTE Cities as 4G Goes Global.)
Overall in the fourth quarter, AT&T added 809,000 subscribers, 300,000 fewer than it did last year. But, it also grew its wireless revenues 4.5% to $18.4 billion. The carrier sold 7.9 million smartphones in the quarter, down from 10.2 million a year ago. Its postpaid churn was at 1.11%, its lowest ever for the fourth quarter.
— Sarah Reedy, Senior Editor, Light Reading