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New trends challenge telecoms brands
NEW YORK: Brand owners in the telecoms category are facing numerous sources of pressure, with customer loyalty levels and revenues per user in decline as the expense of subsidising devices rises.
PricewaterhouseCoopers, the consultancy, conducted in-depth
with 12 major telcos in North America, including Bell Mobility, Sprint Nextel, T-Mobile and Verizon Wireless.
According to the results, the average amount of time the typical postpaid subscriber remains in a relationship with a carrier is 48 months, down from the 59 months registered a year ago.
"Customers are becoming less loyal," Pierre-Alain Sur, PwC's global communications industry leader, said. "Carriers are revisiting their approach to customer relationships and considering new ways to retain subscribers such as device buyback initiatives, leasing programs, and 'bring your own device' approaches."
Elsewhere, the analysis revealed smartphones made up 48% of postpaid sales in 2011, versus 30% in 2010. These gadgets also contributed 51% of postpaid upgrades, up from 36% year on year.
However, this has come at a cost, given the usual subsidy for one of these handsets stands at $280, compared with $70 for more traditional feature phones.
As a consequence, many companies are raising prices from the "popular" entrance point of $199 to $249 or even $299.
"The mobile industry has reached a point where the economics of the current subsidy model associated with acquiring new and upgrading existing customers to costly smartphones have become increasingly difficult to sustain," said Sur.
The average revenue per user among smartphone customers also contracted from $93 in 2009 and $86 in 2010 to just $83 in 2011.
Moreover, the typical subscriber racked up only 638 voice minutes a month last year, a drop of 82 minutes year on year, placing this stream of income under further pressure.
Offering cash rebates, free services and accessories or in-store gifts and waiving activation fees are the main marketing tools being used to encourage handset purchases.
At present, sales and marketing expenses as a percentage of service revenue comes in at 12%, measured against the total of 17% recorded in 2009.
Data sourced from PricewaterhouseCoopers; additional content by Warc staff, 28 March 2012
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