T-Mobile, AT&T, and Verizon Grow; Sprint Shrinks

T-Mobile's (NASDAQ: TMUS) strategy of adding customers by attacking the industry-standard policies of its rivals has worked, giving the company the most subscriber growth in the wireless space during 2016.

The Un-carrier gained by far the most customers last year, but the rivals it goes after most, AT&T (NYSE: T) and Verizon (NYSE: VZ), also added customers, according to data from by Consumer Intelligence Research Partners [opens in PDF] (CIRP). The big loser in the space for 2016, Sprint (NYSE: S), was the only one of the big four that actually saw its subscriber base drop.

"T-Mobile has loyalty rates that are somewhat close to those of AT&T and Verizon ... T-Mobile also continues to attract a higher percentage of customers that switch from other carriers" said CIRP Partner Josh Lowitz in a press release. "Its innovative plans continue to draw attention, and with improved network quality advertising, it now is closer in overall market presence to AT&T and Verizon than it is to Sprint."

T-Mobile CEO John Legere has not been shy when it comes to insulting his rivals. Image source: T-Mobile.

It's about retention, losses, and gains

For all four companies it's an uncertain market where significant numbers of customers are moving between carriers. According to the CIRP data, Sprint lost a whopping 37% of its customer base to other providers while T-Mobile saw 20% move to other carriers, with AT&T losing 18%, and Verizon seeing only 13% of its total user base at the beginning of 2016 defect to other carriers.

Overall, Sprint lost the aforementioned 37% of is subscriber base to other carriers and gained back 23% for an overall year-over-year drop of 14%. T-Mobile conversely lost 20%, but added 39% from other carriers and captured an additional 2% of people getting their first phone, good enough for an overall 22% increase in its customer count in a single year.

The two biggest carriers, AT&T and Verizon, were less volatile. Each posted a total year-over-year increase of 6%.

"AT&T and Verizon experienced the least change, positive or negative," said Lowitz. "Verizon had both the greatest customer loyalty at 87%, but also the smallest gain in new customers. AT&T has slightly lower loyalty but also higher customer gains, so both ended up in the same place, with a 6% gain relative to customers at the start of the quarter. They both continue to grow mostly at the expense of Sprint and other regional and pre-paid carriers."

What happens next?

To varying extents these numbers show that all four carriers are vulnerable. Even Verizon, which lost the least of its audience to its rivals, still lost 13% of its entire customer base in just a single year.

This has happened partly because it's relatively easy to switch from one carrier to another. Since the model of the wireless business has changed from subsidized devices on two-year contracts to leases or consumers paying up front for their phone, it has become easier for people to switch carriers.

That benefits T-Mobile, as the numbers above show, since the company offers a very customer-friendly deal. With barriers to switching being removed, more people are likely to give the company a try and if its network delivers a reasonable experience, they're likely to stay.

In the long run, if T-Mobile continues to close the network gap between itself, AT&T, and Verizon, it could force more people who give it a try to stay around. That could be very bad news for the two higher-priced carriers, which have so far thrived based on the idea/reality that they offer a better network.

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Daniel Kline has no position in any stocks mentioned. The Motley Fool recommends T-Mobile US and Verizon Communications. The Motley Fool has a disclosure policy.