RealTime IT News

Customers Keep on Churnin,' Carriers Fret


In the competitive race to build subscriber base, leading wireless carriers are all on the same quest to lower customer turnover but are using different strategies to achieve their goal.

As Gartner analyst Phillip Redman points out, subscribers leave when network coverage isn't adequate or 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 them to leaving 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.

Market leader AT&T (NYSE: T) is busy bundling packages for specific customer segments aiming to provide what it believes 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.

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.

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 turnover rate overall for the wireless industry.

Success stories

Market leader 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 percent monthly churn rate. Verizon Wireless added 1.5 million subscribers during the quarter and reported a monthly churn of 1.12 percent.

But other carriers are not faring as well. While third-place Sprint reported it had decreased its churn rate from nearly 2.5 percent to just under 2 percent, it also lost 901,000 subscribers. In the first quarter it reported losing 1.1 million subscribers.

T-Mobile, 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