According to the latest reports from UBS, T-Mobile US Inc (NYSE:TMUS) and Sprint Corporation (NYSE:S) are reaching out to the lower-credit customers to boost their postpaid subscriber pool. The report highlighted another astonishing fact for the saturated U.S. telecom industry stating that the four major U.S. carriers are likely to add up to 4.3 million postpaid subscribers this year.
It might come as a surprise to most that the four top US telecom carriers added 737,000 subscribers in 2013 unlike the outstanding odds of adding 4.3 million in 2014. One of the primary reasons behind the increasing subscribers of T-Mobile US Inc (NYSE:TMUS) and Sprint Corporation (NYSE:S) is the fact that both the companies are targeting the segment which initially relied on prepaid plans only. Adding lower-credit-quality customer might affect the performance in the short-term but it is likely to boost the customer turnover in the longer run.
For T-Mobile, this strategy might work out considering that its owner, Deutsche Telekom AG (ADR) (OTCMKTS:DTEGY), is looking to sell a major stake in the telecom company. However, it might take longer than expectations considering the fact that its latest buyer, Iliad SA (EPA:ILD), has withdrawn the acquisition proposal following Sprint Corporation (NYSE:S), which withdrew its proposal because of possible US regulatory permission issues.
On the contrary, Sprint Corporation (NYSE:S) has different reasons to move to the lower-end customers considering the fact that the new CEO is all set to take any measures possible to turnaround the fortunes of the third-largest U.S. telecom service provider. The CEO of Sprint, Marcelo Claure, said that his predecessor “opened the credit vault” for the lower end customers with limited options. Mr. Claure is all set to shift subscriber growth trajectory of the company while tightening its credit requirements, although it is a considerably difficult goal to achieve.
On an overall, this is an excellent strategy for both Sprint Corporation (NYSE:S) and T-Mobile US Inc (NYSE:TMUS) considering the fact that the shares of telecom industries follow their subscriber growth rate.
This article has been written by Prakash Pandey.