Editor’s Note: Welcome to our weekly feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry.
Mobile operators can expect to see continued reductions in churn. Recent research from Analysys Mason’s “Connected Consumer” survey, found the portion of mobile handset subscribers planning to change operator has fallen from 14% in the 2009 survey to just 9% in 2010.
Operators cannot afford to become complacent though; they need to look at why churn is decreasing to ensure they can continue the trend over the coming years. We believe there are two related reasons why churn is decreasing: stable pricing and longer contracts.
Price declines are decreasing in three of the four markets where we have two years of survey data. We believe that customers are more likely to change provider in an environment where prices are falling faster because they feel they can get a better deal from a different operator. Where prices are relatively stable – and any benefit in changing operator is likely to be smaller – customers may simply feel that the saving is not worth the inconvenience of changing provider.
Average contract lengths are getting longer, making people less able to churn. In the United Kingdom in Q2 2009, the average length of a new post pay contract was 17 months. A year later, this had increased to 18.3 months. As consumers perceive, correctly, that prices are more stable, they are more willing to enter into long-term contracts.
The next battle affecting churn is expected to be regarding access to content and applications. As an increasing number of subscribers use data services, operators need to become more competitive on their data offerings. Our survey found that 25% of iPhone owners would change operators for access to content and applications – providing an incentive for operators with unique services to win subscribers, but also increasing the risk of them losing subscribers if they block services subscribers can get on other networks.
In 2009, actual mobile churn was around 30%, where reported – significantly higher than the 14% of customers that said they intended to churn. Operators can also learn from the discrepancy between the intended and actual figures.
Firstly, some operators are treating customers changing contracts as churn – which is significant as 20% of survey respondents say they are planning to change their contract but remain with the same operator. If operators want to use customer data to sell additional services (e.g. for targeted advertising), they need to have better systems in place to track subscribers who are simply changing contracts. Secondly, some subscribers only decide to churn once the contract has expired. In these cases operators need to look at how a customer can be locked into a contract extension before the contract expires. It may be worth, for example, offering valuable customers new handsets at a discount before the contract expires, as a number of operators have done with the iPhone.
The onus is now on mobile operators to capitalise on this decrease in churn as well as carefully planning data services to reduce the risk of it increasing.
For more information regarding Analysys Mason’s Connected Consumer research, log onto: www.analysysmason.com/connectedconsumer.
Tom Rebbeckleads Analysys Mason’s consumer service research, which includes our Fixed Broadband, Mobile Broadband, Voice and Mobile Content and Applications programs. Rebbeck rejoined Analysys Mason from Telef
