Customers Keep on Churnin,' Carriers Fret
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In the competitive race to build subscriber base, leading wireless carriers are all on the same quest to reduce customer turnover but are taking different routes and using different strategy maps to achieve their goal.
Third-place player Sprint (NYSE: N) is focused on what CEO Dan Hesse calls the "valuable" customer -- those who not only pay their bills but are looking for additional services beyond voice service. Market leader AT&T (NYSE:T) is busy bundling packages for specific customer segments aiming to provide what they believe customers truly want when using a mobile device. Verizon Wireless, for its part, said its intent on keeping all its customers satisfied on all fronts.
"We seek to provide the kind of service, whether that's network coverage, products and services or customer service, that not only satisfies customers, but also makes them likely to recommend us to a family member, friend or colleague," Thomas Pica, Verizon Wireless' executive director of corporate communications, told InternetNews.com.
Pica said the company has invested more than $45 billion, an average $5.5 billion annually, on its network since the company was formed in 2000. In 2007 it spent $6.5 billion to expand the network, Pica said.
Such network investment, which all carriers are doing these days, is key to reducing what one analyst believes is still a very high churn rate overall for the wireless industry. As Gartner analyst Phillip Redman points out, subscribers leave when network coverage isn't adequate, when pricing is more compelling with another carrier, or if they want a device not offered by their current carrier.
"Churn has been endemically high in this industry but it's how the carriers work as they almost push [customers] to leaving [rather] than trying to keep them," Redman told InternetNews.com "They've all had a hard time trying to understand their customers or doing a good job of communication with them," he added.
While churn rates have improved, Redman believes the figures of one to two percent a month, totaling 12 to 24 percent a year, reflects that carriers have still not built good relationships with customers.
AT&T and Verizon Wireless, the second largest carrier and owned by Verizon Communications (NYSE: VZ) and Vodafone Group (NYSE: VOD), are succeeding at reducing churn.
AT&T added 1.3 million new subscribers in the second quarter and has a 1.1 monthly churn rate. Verizon Wireless added 1.5 million subscribers during the quarter and reported a monthly churn of 1.12.
But other carriers are not faring as well. While third-place Sprint reported it had decreased it churn rate from nearly 2.5 percent to just under two percent, it also lost 901,000 subscribers. In the first quarter it reported losing 1.1 million subscribers.
T-Mobile USA, the fourth-largest wireless carrier, reported it added 668,000 new subscribers in the second quarter, but that's a drop from 981,000 in the first quarter and from 857,000 in the second quarter last year. Its churn rate of 1.9 percent is up from 1.7 percent in the first quarter of 2008 and above last year's second quarter rate of 1.89 percent.
Next page: Keeping churn down.