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Mobile operators are winning the battle against churn

14 марта 2011

Mobile operators in Europe and the USA can expect churn to continue to decline. Recent research, based on Analysys Mason’s Connected Consumer survey, found that the proportion of mobile handset subscribers who are planning to change operator has decreased from 14% in 2009 to just 9% in 2010.


Figure 1: Intentions of users of mobile services, by country (Question: “Which of the following best describes your plans for your mobile service in the next year?”; respondents who have a mobile phone; n = 5283.)
[Source: Analysys Mason, 2011]

Note: * =  2009 data not available for Spain and the USA.

However, operators cannot afford to become complacent. They need to determine the reasons behind this decline if they are to ensure that it continues. We believe churn is decreasing as a result of two factors: stable pricing and longer contracts.

The rate at which mobile service prices are declining has decreased in three of the four markets we have tracked for two years in our survey (see Figure 2). We believe that customers are more likely to change provider in an environment where prices are falling faster because they will feel that 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 decide that the potential saving is not worth the inconvenience of changing provider.


Figure 2: Year-on-year change in price paid for a mobile voice minute, selected countries, 2008–2010 [Source: Analysys Mason, 2011]

Average contract lengths are getting longer, making people less able to churn. The average length of a new postpaid contract was 17 months in the UK during the second quarter of 2009. A year later, this had increased to 18.3 months. Users are becoming more willing to enter into long-term contracts as they recognise that prices are becoming more stable.

Access to content and applications is likely to be the next factor that has an impact on churn. Operators will need to focus on the competitiveness of their data offers as the number of subscribers that use data services increases. Our survey found that 25% of iPhone owners would change operators to gain access to specific content and applications. Operators that have unique or exclusive services, therefore, have a lure that could help them to win and keep subscribers. Conversely, this growing trend also increases the risk of operators losing subscribers if they block services that are available on other networks.

The actual mobile churn rate in developed markets stood at about 30% in 2009, where it was reported. This is more than twice the percentage of survey respondents who said they intended to churn that year (14%). Operators can learn two things from this discrepancy.

First, some operators are counting instances of customers changing contracts, but not provider, as churn. This could account for a significant proportion of their churn figures: 20% of our 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 (for example, targeted advertising), they need to have better systems in place to track subscribers who are simply changing contracts.

Second, some subscribers only decide to churn when their contract has expired. In these cases, operators need to find a method of locking customers into a contract extension before it expires. For example, they could offer new handsets at a discount to valuable customers before their contract expires, as some operators have done with the iPhone.

The onus is now on mobile operators to capitalise on this decrease in churn, as well as carefully plan data services to reduce the risk of it increasing.

Tom Rebbeck, Research Director


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