There are many reasons for a mobile user to switch to another operator. While poor customer service and price are key factors in driving customers away, simply losing a handset can be another factor increasing the churn rate.
"Anytime someone loses their handset, they would have to go out to the market to buy a new handset, and thus will be exposed to new rate plans and new operators," says Daniel Currie, president and CEO of Asurion Asia Pacific, which provides wireless handset and device protection programs to mobile operators.
Phone loss has become a disruptive event in the wireless industry, and more operators are beginning to realize just how serious a lost or stolen phone can be.
Some mobile operators have turned to offering handset insurance programs for free or as a value-added service to boost customer satisfaction and reduce churn.
South Korean cellco KTF has partnered with Asurion to offer a handset insurance program. Back in 2003, the competition in the country's mobile market was intensified due to the prohibition of handset subsidies and the introduction of mobile number portability. The number of handsets lost or stolen hit 4.5 million in 2004, up 27.8% the year before.
Currie says KTF, Asurion's first customer in Asia, initially offered a handset insurance program to its VIP customers for free for the first three months, covering such things as lost or stolen handsets, technical difficulties and water damage. The company later extended it to other subscribers as a value-added service at an average price of $2-$3 a month.
KTF has since bundled the program as a free offering with some of its low-end monthly plans at $15 and $20. NTT DoCoMo and Far EasTone have also introduced similar handset insurance programs in Japan and Taiwan.
Far EasTone offers a three-month handset insurance service free to customers who buy a new handset and to other customers at a cost of $4-$5 a month.
DoCoMo has started offering insurance to its 3G FOMA subscribers to reduce churn amid the implementation of mobile number portability.