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Smartphones encourage mobile user churn

Owners of high end handsets are the least loyal, bad news for AT&T


Published: 22 September, 2010

READ MORE: US | AT&T | iPhone

High end smartphones not only bring operators' networks crashing down with their high rates of data consumption, but they breed fickle consumers who will worsen churn levels, especially as users get more hostile to two-year contract lock-ins. The downside of the smartphone boom is highlighted in a survey by Nokia Siemens, which found that users of high end handsets are the least likely to stay with their carrier.

In the US, 31% of this group are ready to switch cellco for better services, and only 17% say their current carrier is the only one they would ever consider using. This is despite the rising cost of early termination fees, and the operators' enthusiastic efforts to talk up their investment in improving their networks' performance and coverage.

Before smartphones, the main driver of customer loyalty was network coverage and signal strength. Now the device is the main factor for customers choosing a carrier, and applications and services play a major role in keeping them loyal, both to the device and the network.

The major test of consumer loyalty will come with the end of the AT&T iPhone exclusive, whenever that may be. A study by Deloitte found that 50% of AT&T iPhone users would like to switch to Verizon's network, which they perceive as superior in quality, and a new Credit Suisse report estimates that AT&T would lose 23% of its Apple customers, about 1.4m users, to its rival. Another investment research house, TownHall Research, is even more gloomy on AT&T's prospects, believing 50% will defect (both predictions are over the remaining life of iPhone contracts, some of which will still have 18 months to run should Verizon launch an Apple handset at the turn of the year).

However, while AT&T CEO Randall Stephenson has said in conference speeches and FCC filings that about 80% of iPhone users are on family plans and "those customers don't tend to churn", Credit Suisse thinks 3% of current iPhone users would move immediately to the rival network, despite hefty penalties for breaking the contract early.

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