Investigating Privacy-Preserving Federated Learning for Telecom Customer Churn Prediction Using Differential Privacy

Abstract

Predicting customer churn in the telecom sector is critical for retaining subscribers, maintaining brand reputation, and staying ahead of competitors. Losing customers not only reduces revenue but can also weaken long-term market position in a highly competitive industry. While machine learning has been widely used to address this challenge, most traditional approaches depend on centralizing customer data. This raises major concerns about user privacy, data ownership, and compliance with strict regulations such as GDPR. These challenges make it difficult for businesses to fully utilize customer data while safeguarding sensitive information. In this paper, we investigate a privacy-preserving approach to churn prediction that combines federated learning (FL) with differential privacy (DP). Rather than collecting all customer data in a single repository, the investigated framework enables multiple clients to collaboratively train a deep neural network while maintaining data locality during the federated training process. To further enhance privacy protection, we employ Differentially Private Stochastic Gradient Descent (DP-SGD) and add controlled noise to model updates, reducing the possibility of inferring individual data contributions. This work systematically evaluates how different privacy levels, expressed through ε and δ, influence model performance under simulated non-IID client distributions. The experiments analyze the privacy–utility trade-off using multiple evaluation metrics and compare the results with centralized and non-private federated-learning approaches. The findings show that the investigated framework maintains competitive predictive performance across a range of privacy budgets while demonstrating a clear privacy–utility trade-off. Very strict privacy budgets result in substantial performance degradation, particularly for smaller and more imbalanced datasets, whereas moderate privacy budgets maintain competitive predictive performance with limited degradation. This study highlights the potential of privacy-preserving federated learning for practical distributed analytics applications where protecting sensitive data is essential.