Fighting churn with trendy handsets and fast data networks

Jessica Scarpati
26 Mar 2010

Avoiding wireless churn has long been about keeping customers happy with voice quality, reliable service and competitive pricing, but the rules of the game are changing. The arrival of the iPhone and its various smartphone rivals, such as Motorola's Droid, demonstrates that operators will now have to cultivate loyalty with attractive smartphone portfolios and strong mobile data networks to support those devices.

"In today's market, price doesn't drive a decision for a satisfied user [to change carriers], whereas 10 years ago, there was no user satisfied enough that price wasn't going to make a difference," said telecom consultant Tom Nolle, president of CIMI Corp. "Users are enamored enough about certain smartphone models -- the iPhone, in particular -- that they will change operators to get a specific phone, and that has never been true in the past."

In the US, AT&T has historically lagged far behind biggest rival Verizon in churn rate, dating back to the days of Cingular. In 2004, Cingular's wireless churn rate was 2.6% for prepaid and postpaid customers. Verizon Wireless led the pack with a 1.4% mobile churn rate that quarter.

Despite the bad press AT&T has received over the way its 3G network has handled the unanticipated flood of data traffic from the iPhone, its fourth-quarter wireless churn rates dropped in 2009 to 1.44% -- nipping at the heels of Verizon, which reported a 1.42% total customer churn rate.

"The iPhone changed things," said John Carney, senior vice president of consumer marketing at Sprint, which reported a 2.11% churn rate last quarter, down from 2.16% year-over-year. "In general, most of the carriers had relative parity on device selection until the iPhone."

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