Wireless Churn Rates Rising

To the surprise of many, the first few months of local number portability (LNP) saw little change for wireless carriers, finds In-Stat/MDR. However, the research firm believes that, with the kinks ironed out and with more cellular contracts expiring, churn is bound to increase in both the consumer and business environments.

"Everyone expected churn rates to increase dramatically and immediately as a result of LNP implementation," says Becky Diercks, Director of Custom Research and Principal Wireless Analyst with In-Stat/MDR. "However, this was not the case. And, while churn rates were anticipated to increase with some carriers more than others, AT&T Wireless was one of the biggest losers due to LNP implementation -- a somewhat unexpected event."

In the first few months after LNP was implemented, many of the carriers had technical difficulties switching users over to other providers and porting the numbers. Word spread about these difficulties, which caused some users who wanted to switch providers to wait. An additional issue is that users must pay a cancellation fee to switch if they have not reached the end of their contract period. Most people are not so dissatisfied with their provider that they want to pay this fee. According to Diercks, "With the carriers having now, for the most part, resolved these technical problems and more people switching carriers as their contracts expire, churn will definitely be on the rise over the course of the year." LNP affected consumer churn more than business churn in the first few months of implementation and In-Stat/MDR expects to see increased churn, particularly in the business environment, in the next few months.

A February 2004 survey of In-Stat/MDR's wireless panel (composed primarily of business users) found the following:

• 5% of respondents (more than 1,000 cellular phone users) had changed their cellular service provider since November 24th, 2003. Of those who had switched providers, 63% kept their phone numbers when switching. Another 7% of respondents said that they expect to switch providers in the next three months, and at least half of them plan to take their number with them when they switch.
• Verizon Wireless' customers were most satisfied with their services.
• 11% of T-Mobile's customers switched to another provider within the first months of implementation, compared to 8% of Cingular's customers.
• In the next three months, 14% of AT&T's customers are thinking of switching -- higher than any other provider by a factor of two.
• The majority of respondents (end-users and decision-makers) who are thinking about switching say the number one action carriers can do to keep their business is to offer better service pricing.

Posted to the site on 14th April 2004