With consumer mobile penetration near saturation, soaring retention costs, consumer price sensitivity and surging data traffic demands, carriers must look beyond market share to advance their growth and profitability, according to PricewaterhouseCoopers' new report, “Change is in the Air: 2009 North American Wireless Industry Survey.”
According to PwC, growth will be driven by making existing customers more profitable, and less by finding new customers.
"The U.S. mobile market is entering an era during which margins and profitability will trump penetration and volume. Where customer experience had been the focus, the emphasis is now shifting to price, across a range of customers – including premium users, value-oriented family plans and the pre-pay market," said Pierre-Alain Sur of PricewaterhouseCoopers. "Now, mobile carriers must dive deeply into the profitability profiles of all their existing customer categories. And with today's enhanced visibility, carriers have a far more robust set of tools to increase their bottom lines across every kind of customer interaction."
Focusing on subscriber retention remains a critical issue due to escalating retention costs. Large carriers invested more than $160 per subscriber in their networks in the 2009 survey – a more than 30 percent leap compared with the 2008 survey. U.S. wireless companies reported an increase in customer retention expenses of more than 50 percent in 2008 compared with 2007.
The survey finds that the downturn in the economy triggered an increase in consumers moving toward prepaid plans. On average, use of prepaid minutes increased more than 147 percent in the past four years, from 270 minutes in 2006 to 667 minutes in 2009, PwC said.
And the ever-so-talked-about smartphone sales are increasing and represent significantly higher average revenues per user. As of June 30, 21 percent of all mobile device sales were smartphones, and an average of 12 percent of overall subscribers use smartphones. The average revenue per user for smartphones is $74, compared with total postpaid average revenue of $54.
Despite the downturn in the economy, carriers continue to invest in their networks and infrastructure to address increasing data demands, and carriers are beginning to migrate toward 4G technology. On average, capital expenditures as a percentage of service revenues increased to 21.5 percent in the 2009 survey, from 18 percent in the 2008 survey.