According to a new report from PricewaterhouseCoopers, mobile carriers will have to find ways to milk more revenues from existing customers rather than relying on revenues from new subscribers to support profitability.
The report, “Change is on the Air: 2009 North American Wireless Industry Survey,” noted that customer retention efforts are becoming critical for carriers as the pool of new customers has dwindled and the cost of customer retention efforts increased more than 50% from 2007 to 2008 and came in at more than $160 per subscriber in 2009. The report also noted that the economic downturn has resulted in an increase in prepaid usage by wireless consumers with prepaid minutes surging more than 147% over the past four years.
“The U.S. mobile market is entering an era during which margins and profitability will trump penetration and volume. Where customer experience had been the focus, the emphasis is now shifting to price, across range of customers – including premium users, value-oriented family plans, and the pre-pay market,” said Pierre-Alain Sur, U.S. wireless industry leader at PricewaterhouseCoopers. “Now, mobile carriers must dive deeply into the profitability profiles of all their existing customer categories. And with today’s enhanced visibility, carriers have a far more robust set of tools to increase their bottom lines across every kind of customer interaction.”
One way to increase revenues from current subscribers is to increase penetration of smartphone devices that PricewaterhouseCoopers said result in $20 per month in extra revenues per subscribers compared to non-smartphone subscribers. This result is backed by recent changes made by the nation’s two largest wireless operators, Verizon Wireless and AT&T Mobility, requiring smartphone users to sign up for a $30 per month data package. Feature-phone subscribers are required to sign up for a $10 per month data package.
PwC also provided some insight into how carriers can better manage their customer retention efforts, including:
–Gain more clear insights across the customer base into who contributes to (and detracts from) profitability.
–Adopt targeted and scaled strategies to ‘go the extra mile’ for high-performing customers and to more carefully mitigate the costs of unprofitable customers.
–Develop customized tools that ensure every touch point-initial contract, handset subsidies, service and retention efforts-keep the bottom line of that unique customer in mind.
–Craft tiered pricing options based on the cost profiles of different customers (e.g. smart phone users v. less data-intensive customers).
The survey also found that carriers are also not backing away from network investments. The PwC report showed that on average, capital expenditures as a percentage of service revenues increased from 18% in their 2008 survey to 21.5% in the 2009 survey. Much of this can be attributed to carriers ramping up their spending on next-generation technologies like LTE and WiMAX as well as increased spending on beefing up their current 3G networks to handle growing data usage.
