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AT&T finds fewer customers fled in the first quarter

Thanks to its "no device subsidy" model, AT&T says it lost fewer customers to rivals than it ever has in the first three months of the year.

AT&T is weathering the mobile wars by stemming the pace at which its customers jump ship.

Sarah Tew

The nation's second-largest wireless operator said Wednesday that during the first quarter of the year it added 441,000 postpaid wireless subscribers. It also reported a "churn rate," or the rate at which customers leave its service, of 1.02 percent, its lowest ever for the first three months of the year.

The customer additions and the lower rate of defections come as AT&T faces intense competition from companies such as T-Mobile and Sprint, which have been aggressively pricing service plans to attract customers. On Wednesday, T-Mobile and Sprint also announced they have partnered with Google on an experimental network service that seeks out the fastest-performing network, whether it's over Wi-Fi or via one of the carriers' LTE networks.

Meanwhile, rival Verizon, which reported its earnings results yesterday, fell short of analyst expectations and added only 565,000 new postpaid customers in the first quarter. A closer look at Verizon's numbers revealed that many of the new additions were tablet customers rather than handset subscribers.

In the fourth quarter of 2014, AT&T had added 854,000 postpaid customers -- that is, those with higher credit scores who pay at the end of the month -- and in last year's first quarter, it added 625,000 of those more lucrative customers.

The problem that AT&T and Verizon have faced is deciding whether to protect their customer bases by offering lower pricing to match competitors, or to hold prices steady and hope they don't lose too many customers. Verizon has been better about keeping prices stable, although it showed a few cracks in its foundation when it revamped pricing last year and gave subscribers more data for the same amount of money.

AT&T has reacted more to the actions of T-Mobile, which every few months announces a new offer as part of its so-called Uncarrier strategy. It followed in T-Mobile's footsteps and did away with its device subsidy program, which now seems to have put the company in a better position to retain its customer base.

"The first quarter was a significant step in a transformative year for AT&T," Randall Stephenson, AT&T chairman and CEO, said in a statement. "The repositioning of our wireless customer base to no-device-subsidy plans drove industry-leading postpaid churn."

AT&T reported a profit of $3.2 billion, or 61 cents a share, for the first quarter. This compares to a profit of $3.65 billion, or 70 cents a share, a year earlier. Excluding pension-related charges and other items, the company's earnings actually fell to 63 cents a share from 71 cents. Revenue for the quarter just ended was $32.6 billion.

The company's share stock price was up less than a percent after the market closed to $33.05 a share.