Where Is T-Mobile's Subscriber Growth Coming From?

T-Mobile (NASDAQ: TMUS) pre-released its fourth-quarter earnings results earlier this week, and once again, it topped 1 million postpaid net customer additions. It's the 19th straight quarter the wireless carrier added over 1 million net new customers. Meanwhile, competing carriers Verizon (NYSE: VZ), AT&T (NYSE: T), and Sprint (NYSE: S) have struggled to keep their most valuable subscribers on their service plans.

But one competing carrier is struggling more than others. While T-Mobile saw its porting ratios -- a good indicator of customer switching rates -- rise with all of its competitors, its ratio with Sprint increased significantly more than others in the fourth quarter. 1.5 Sprint customers ported their phone numbers to T-Mobile for each T-Mobile customer that went to Sprint. That's up from 1.25 in the previous quarter. T-Mobile's porting ratio with AT&T and Verizon went up by 0.1 off a higher base.

Sprinting away from Sprint

Sprint is facing a major challenge following the end of its merger talks with T-Mobile. Forced to go it alone, Sprint is now focusing on building out its wireless network, which lags well behind the competition. In the meantime, its only big differentiator, price, is going by the wayside.

Sprint has run several aggressive price promotions over the last few years. It started offering new subscribers a chance to "cut your bill in half" at the end of 2014, and it expanded the promotion at the end of 2015. Now it's offering a free year of its unlimited data plan for new subscribers -- a promotion that was only supposed to last a limited time last summer but is still available today.

Sprint plans to move away from its aggressive pricing this year with a goal of reaching service revenue growth by the end of 2018. Additionally, the largest cohort of customers that signed up on its "cut your bill in half promo" will see their promotional rates expire shortly, if they haven't already. The price increases are only going to put further pressure on gross additions while pushing the company's churn rate higher.

T-Mobile has already been a big beneficiary of disappointed Sprint customers in the fourth quarter. It's very likely T-Mobile -- and its focus on customer value -- will attract the lion's share of Sprint deserters in 2018 as well.

Don't forget about AT&T and Verizon

While Sprint's porting ratios jumped the most in the fourth quarter, the very fact that AT&T and Verizon have larger customers bases means that T-Mobile is actually gaining more subscribers from the duopoly than Sprint. It's also why it regularly exhibits higher porting ratios with the two market leaders compared to its smaller competitor.

AT&T has fared worse than Verizon, especially since Verizon introduced its new unlimited data plan. T-Mobile saw a significant drop in its porting ratio with Verizon following the introduction of that plan, but AT&T's efforts to bundle new services has had little effect on its ability to attract new customers from T-Mobile. Verizon has also seen a turnaround in its net postpaid phone subscriber additions and its service revenue since introducing its unlimited plan.

Overall, AT&T is likely the biggest donor of subscribers to T-Mobile, while Sprint may have seen the biggest percentage increase in subscribers lost to the Un-Carrier in the fourth quarter.

Don't count out T-Mobile's efforts to retain subscribers

There are two sides to the net subscriber addition equation: gross additions and customer retention. T-Mobile posted its lowest fourth-quarter postpaid churn rate ever, coming in at just 1.18%.

Granted, this year's fourth quarter was one of the least competitive in recent history. Carriers have offered free iPhones and other discounts to woo new customers in the past, driving up churn rates across the board. This year was much more tame by comparison with limited discounts on flagship phones.

That said, T-Mobile took some steps on its own to ensure better customer retention. It began bundling Netflix with its multiline unlimited data plans. It also promised it will never raise the rates on existing customers last year, which feeds into consumers' loss aversion. On top of that, it's still improving its network and making its core service better. All of that adds up to more loyal customers.

So, with all of its major competitors giving more than they take away, and T-Mobile holding onto more subscribers, it managed yet another stellar quarter of subscriber growth.

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Adam Levy owns shares of Verizon Communications. The Motley Fool owns shares of and recommends Netflix and Verizon Communications. The Motley Fool recommends T-Mobile US. The Motley Fool has a disclosure policy.