Feature Article

April 13, 2012

Mobile Customer Churn is a Complicated Issue

The average mobile customer switches service providers every 27 months – more than twice as frequently as a decade ago – according to Strategy Analytics. Perhaps more surprising, some 44 percent of customers switch providers each year, the highest level yet. On the surface, that would be worrisome for service providers. 

But some will instinctively question those statistics, as major service providers in many markets have seen relatively low and stable churn rates over the past several years. But there is an important caveat. Relatively stable and low churn rates at the largest U.S. mobile service provider firms, for example, are primarily characteristic of the “postpaid” customer base.

Prepaid churn rates tend to be higher than postpaid churn, virtually everywhere. Average prepaid customer lifetimes have halved over the last five years, to only 17 months, according to Strategy Analytics.

AT&T and Verizon Wireless, for example, have churn rates of around 1.1 percent per month. For a consumer service, that’s low.

Many “subscriptions” are also really purchases of subscriber information models, not new phones and “primary” subscriptions, and that increases the volatility of churn data.

By way of contrast, average postpaid customer lifetimes of 67 months (5.6 years) have improved from the depths of the global recession in 2008.

"Prepaid churn has really been hit by promotional SIM card activity in developing markets, making customer loyalty virtually obsolete in some countries," said Phil Kendall, Strategy Analytics director. "For example, prepaid churn in Asia-Pacific is nearly 100 percent per year. It doesn’t cost much to push new SIM cards into the market.

So the point is that mobile customer churn is a bifurcated issue. In many markets, postpaid churn now is quite low. But prepaid services can experience very-high churn.

Edited by Braden Becker

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