Telecom companies have been crushing it lately, at least in terms of their core wireless businesses. In the past 12 months alone, the industry has added an approximated 8 million postpaid phone lines, and the largest providers want to keep that party going by holding hands with some of the biggest streaming services.
Earlier this week, T-Mobile announced it would be offering Apple TV+ for one year to its new and existing customers on select phone plans. The deal is just the latest in a long list of promotional pacts and underscores the growing value a streaming service can bring to telecom firms — and vice versa.
These increasingly common partnerships with streaming apps are particularly important to wireless companies because keeping churn low, or customers from leaving, is crucial to maintaining a healthy top line. Telecom companies rely heavily on recurring revenue from monthly bill payers, and because consumers are fickle, constant promotions are necessary to keep them from jumping ship.
With the rapid pace of cord-cutting, the telecom giants have had to lean in on their wireless and high-speed Internet businesses and get more creative to keep their customers happy. When you look at the numbers, the partnerships with streaming services bring telecom companies a burst of subscriptions.
The trend of telcos bundling video apps with their wireless plans began with T-Mobile’s “Netflix on Us” promotion to some of its unlimited-plan customers in late 2017. In November 2018, Verizon began offering 12 months of Disney+ free to some customers; the telecom giant announced an expansion of that partnership in August 2020. Customers of Verizon’s two most expensive unlimited plans would be able to continue getting Disney+ for free, and the promotion would also include Hulu and ESPN+.
AT&T began offering its own streaming service HBO Max free to select customers in May of last year, and Comcast gave its Xfinity customers ad-free Peacock Premium for no additional cost. Most recently, Verizon announced it would be offering newly launched Discovery+ free for one year to select unlimited-plan customers.
As a result of “Netflix on Us,” T-Mobile’s postpaid phone customer additions jumped from 595,000 in Q3 to 891,000 in Q4 in 2017. The company said the strong growth was “driven by the continued strong customer response to our Un-carrier initiatives and promotional activities,” according to T-Mobile’s earnings release. “Customers are loving Un-carrier benefits such as Netflix on Us.”
AT&T may be offering its own streaming service HBO Max free to select customers, but it appears to have been a worthwhile move for the company. In the first full quarter following HBO Max’s launch, AT&T added 645,000 net new phone subscribers in Q3 2020, up from a loss of 151,000 in the prior quarter.
Comcast didn’t give its wireless users Peacock Premium free, which is why it’s not included in the chart above, but it did make the offer to some high-speed Internet users. Guess what happened in the quarter following the promotion. Comcast added a record 633,000 high-speed Internet customers and 556,000 total net new customer relationships.
Given the recent strength of the wireless and high-speed Internet businesses, some telecom companies, such as AT&T and Verizon, are ditching their media ventures to go all in on the core aspects of their business to drive maximum profitability.
However, keeping churn as low as possible and recurring revenue high will be even harder for telecom companies going forward, as many worry that the monster wireless growth over the past year will be difficult to sustain. And investors and analysts will be keeping a close eye on whether the recent partnerships with streaming apps will be able to drive long-term growth in the quarters ahead.