Editor’s note: T-Mobile’s recent good news about record-low postpaid subscriber churn in the second quarter of this year is a sign that the wireless provider’s strategy is paying off against keen competition from Verizon, AT&T and Sprint, says Technology Business Research Analyst Steve Vachon.

HAMPTON, N.H. – T-Mobile reported its lowest postpaid phone subscriber churn in its history in 2Q16 despite facing intensified competitive pressure from Sprint. T-Mobile’s Un-carrier initiatives are helping cement the operator’s subscriber base, despite customers having the option to enroll in less expensive service plans through Sprint or prepaid competitors such as Cricket.

The trend highlights T-Mobile is less adamant about being the pricing leader in the wireless industry, instead emphasizing the exclusivity and overall value proposition of its service offerings to grow its subscriber base. T-Mobile’s strategy is helping to better preserve ARPU and improve margins while also contributing to the operator outperforming competitors in postpaid phone net additions the past 10 consecutive quarters.

Binge On, which offers “data free” access to video streaming services, has become the centerpiece of T-Mobile postpaid portfolio and is available to over 100 participants, including YouTube and Netflix. Binge On will be paramount for T-Mobile in securing its subscriber base amid the launch of DirecTV Now later in 2016, as AT&T will most likely offer unlimited wireless data plans and other bundles to support the platform.

In July T-Mobile introduced its new customer loyalty program, #GetThanked, which TBR believes will help retain customers but will not move the needle in attracting new subscribers compared to more innovative Un-carrier offerings such as Binge On. The launch of #GetThanked also indicates T-Mobile may be running out of wireless pain points it can help resolve.

T-Mobile remains the U.S. leader in wireless revenue growth

T-Mobile’s revenue increased 12.8% year-to-year and remains the only U.S. Tier 1 carrier able to increase service revenue. T-Mobile is able to outperform competitors in service revenue growth because the bulk of postpaid additions (73% in 2Q16) are from phone additions whereas the bulk of Verizon’s and AT&T’s new postpaid subscribers are from lower-value tablets. T-Mobile’s service revenue is also increasing due to its higher prepaid ARPU, which stems from MetroPCS steering customers to higher-tier data plans.

A concern for T-Mobile is its potential to sustain long-term revenue growth, as the company offers a limited portfolio of services outside its core consumer mobility segment. Whereas AT&T and Verizon have new business segments they can rely on to grow revenue amid the saturating U.S. wireless phone market, such as digital advertising and media, T-Mobile’s options are limited.

Though lagging behind AT&T and Verizon in IoT significantly, the carrier is beginning to carve out a niche in the segment. By continuing to operate its GSM network until 2020, T-Mobile is attracting 2G machine-to-machine (M2M) customers from AT&T, which will shut down its 2G network at the end of the 2016. Conversely, T-Mobile will be able to provide IoT connectivity to a broader base through its recent partnership with Twilio, and investments in 5G will position T-Mobile to power advanced M2M solutions in the long term.

(C) TBR