The specialized mobile radio industry grew 13 percent last year, but operators reported a steady increase in industry churn during 1995, says a new market study produced by Economic and Management Consultants International Inc. and the American Mobile Telecommunications Association.
The report indicates industry churn increased from 17 percent in 1994 to about 21 percent in 1995. One leading reason for the trend is a soft economy in the private sector, said AMTA President and Chief Executive Officer Alan Shark.
“Traditionally, churn in the SMR industry has more to do with economy,” Shark said. The small businesses that use SMR units, such as construction companies, are going out of business or cutting back on communications, he said.
SMR operators also are losing their customers to cellular carriers. People want the mobility and advanced interconnection that cellular services have to offer, and more cellular carriers are offering advanced features, he said.
Shark noted that because the study represents only a sample of SMR operators, the churn rate may not have represented the entire SMR industry. He said the industry has experienced low churn rates for years.
“This is a blip in an otherwise perfect rating [for the SMR industry]. It could have been a few members that this happened to, and that wouldn’t take much to change the percentages,” Shark said.
EMCI analyst Steve Virostek predicts the churn rate will continue to rise as operators roll out their digital mobile networks and give consumers more choices for service.
“Once operators open up digital voice and data services, people will be signing up to see what it’s like,” Virostek said. “The late adopters [of SMR services] are more likely to churn because they have more choices available.”
In spite of the higher churn rate, the delay of SMR digital mobile radio network buildout and frozen licenses, the industry added 230,000 new radio units during last year-a 13 percent gain compared with 1994.
“A lot of SMR operators have reached capacity even with a license freeze. Despite this adversity, we have grown; and if we can grow in a bad year, we are encouraged for the future,” Shark said.
EMCI predicts SMR operators won’t have the additional capacity needed to maintain the industry’s traditional growth rates until late 1997. In 1998, spectrum-efficient networks should ease and maintain network capacity problems experienced in today’s market, EMCI said.
With abundant capacity and a display of new communications services, the study forecasts that the industry will grow swiftly to about 4 million subscribers by the end of the decade. Digital systems should account for nearly 1.8 million subscribers during the next five years.
