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Pacific Crest Securities

In our latest carrier survey of 1,289 respondents, T-Mobile US once again showed positive net churn, while the other big four carriers have now had consecutive quarters of negative churn.

We believe T-Mobile (ticker: TMUS ) is taking share from the incumbents and that this will continue in 2015. As churn comes down at T-Mobile, net subscribers should continue to be strong as T-Mobile continues to take a large share of gross added subscribers.

T-Mobile continues to show well in our survey, and we believe it is best positioned to take share. T-Mobile is the only big four carrier in which more of our survey respondents plan to join than leave over the next 12 months. Since the inception of our survey, T-Mobile is the only big four carrier to maintain a positive response in this category, and it remains our favorite stock among the carriers.

AT&T (T) results have been improving; however, we remain concerned that the overall hypercompetitive environment will continue to cause AT&T to lose subscribers. Sprint (S) may become interesting after the effects of network modernization disruption declines, and if subscriber satisfaction continues to improve; however, net churn remains negative and share of gross added subscribers continues to decline. Verizon Communications ( VZ ) responses leave us increasingly concerned about the company’s ability to generate new net subscribers as satisfaction trends are decreasing, which may cause loyalty to decease and lead to higher churn.

T-Mobile again showed positive trends in our current survey, outpacing its rivals in key metrics. Sprint and AT&T results are improving, and Verizon results still leave us concerned. We anticipate competitive levels to remain very high as carriers strive to add customers and lower churn. We are buyers of T-Mobile and it remains our top pick in the sector.

AT&T shows improvement, but low price satisfaction dampens the mood in a hypercompetitive environment. AT&T showed well in our survey, with loyalty and net churn improving sequentially. Net churn remains negative, but heading in the right direction. In addition, AT&T showed the largest percentage increase in planned destination, which has positive implications on future churn. However, we remain concerned that low price satisfaction among respondents will keep potentially switchers put.

Sprint is improving, but overall trends cause us concern. Loyalty at Sprint has been highly questionable. Recent results show sharp increases followed by sharp decreases, which could be indicative of the company’s network-modernization efforts, which were very disruptive. Subscriber satisfaction is improving across key metrics; however, we remain concerned overall as net churn stays negative and share continues to decline.

Verizon survey results show muted responses in our survey, with loyalty increasing slightly sequentially and the company maintaining its lead in overall loyalty among our respondents. However, loyalty has been decreasing in all of our other surveys and planned net switching remains negative. While subscriber satisfaction trends are still high relative to the other carriers, Verizon is the only carrier to not show improvement in our satisfaction results year-over-year. This leaves us questioning Verizon’s ability to reduce churn and increase its percentage of gross added subscribers.

-- Michael Bowen

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