When Cingular Wireless L.L.C. bought AT&T Wireless Services Inc. in 2004, creating the nation’s largest cellular carrier, Verizon Wireless found itself handing over its title belt as the U.S. heavyweight wireless leader. But since then, Verizon Wireless has been posting the best churn figures in the industry and consistently adding more than a million net subscribers a quarter. The company is creeping up on Cingular, which still retains and touts the title.
“Ever since Cingular took Verizon’s mantle as the largest national carrier after its merger with AT&T Wireless, it has been looking to compete more directly with Verizon Wireless by using subscriber and network size to its advantage,” said Current Analysis analyst Weston Henderek in a recent report.
In terms of subscribers, Cingular’s third-quarter figures put the carrier at 52.3 million subscribers, with Verizon Wireless at 49.3 million customers. Cingular combated 2.23-percent average churn during the first three quarters of 2005. Verizon Wireless has the lowest churn rate in the industry, with an average of only 1.26 percent for the last three quarters. Although Cingular has higher gross adds, its churn rate means that Verizon Wireless is coming out on top in terms of net customer additions.
Projections from Jonathan Atkin of RBC Capital Markets reckon that by the end of 2006, the two carriers will be neck-and-neck in number of total subscribers, with Cingular perhaps keeping a slim lead of about 100,000 subscribers. Yankee Group analyst Marina Amoroso estimated that Cingular could be overtaken by Verizon Wireless within three quarters unless Cingular improves its churn rate.
While many analysts say that the cache attached to being the carrier with the most customers merely secures bragging rights, Amoroso noted that Cingular has tried to use its size to differentiate itself from the other mainstream carriers, while Verizon Wireless emphasizes network reliability.
“On one hand, when you’ve got two very big companies, it doesn’t really matter who is the biggest,” said analyst Adam Guy of Compete Inc. “It’s more about corporate bragging rights than real consumer value.”
The exception to that, he noted, is the value of in-network calling offered by both Cingular and Verizon Wireless.
When Cingular bought AWS, Guy noted, it had the most customers that new subscribers essentially could call for free and has been able to leverage its size as a selling point-a strategy that may be short-lived if Cingular can’t maintain its claim of having the most subscribers.
“By promoting the fact that it has the most subscribers and the largest network, Cingular has been using Verizon-like add-on features such as unlimited mobile-to-mobile and competitive family plan add-on options to increase its subscriber case,” Henderek agreed.
Verizon Wireless tried to take advantage of its own large subscriber base by pushing its “Are You In?” marketing campaign earlier in 2005, then switched mid-year to emphasizing network reliability with an “It’s the Network” slogan. The company also offers a free service through its Web site for consumers to check whether other people’s cell phones are on the carrier’s network, but says that size isn’t its primary focus.
“Customers don’t care who is the biggest,” said Tom Pica, spokesman for Verizon Wireless. “What they care about is the quality of their service and the network, and the quality of the customer service, and we’ve been working hard to lead in all of those areas.”
In areas other than subscriber numbers, the differences between the two companies are starker. Verizon Wireless is far ahead of Cingular in terms of its high-speed wireless network; Cingular recently launched UMTS/HSDPA services in 16 markets, while Verizon Wireless offers its CDMA2000 1x EV-DO mobile broadband network in more than 170 markets and can target business customers who initially might have hopped onto Cingular’s slower EDGE network. Cingular, on the other hand, can offer international roaming on GSM networks because it uses the same technology and, Henderek noted, Verizon Wireless “has still trailed competitors like Cingular when it comes to launching the latest and hottest devices,” though Verizon Wireless has made a big step forward recently by offering its own version of Motorola Inc.’s popular Razr handset.
Cingular representative Clay Owen would say only that “it’s Cingular’s vision to be the most highly regarded wireless company in the world by 2007,” and noted the company had increased subscriber numbers, rolled out high-speed wireless data services, introduced push-to-talk and improved its network since the acquisition of AWS.
“There’s more to be done, but we’re off and running,” Owen added.
