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Wireless Churn Rate Hits Record Low: Is It Sustainable?
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By focusing on customer retention rather than pushing customer addition through promotional campaigns, the wireless industry has seen its lowest level of customer churn rate in the second quarter of 2016. The industry churn rate at the end of this reporting quarter was 1.22%.
However, the same is anticipated to increase in the upcoming quarters when the major telecom carriers restore their promotional activities after the launch of several smartphones, particularly the iPhone 7 from Apple Inc. (AAPL - Free Report) . Customer churn rate displays the percentage of subscribers who cancel their services during a specified time period.
The Numbers
AT&T Inc. (T - Free Report) and T-Mobile US Inc. (TMUS - Free Report) , two of the top four wireless players, have improved their churn rate with rates of 0.75% and 1.27%, respectively, compared to 1.01 and 1.32% a year ago. Meanwhile, Sprint Corp. (S - Free Report) and Verizon Communications Inc. (VZ - Free Report) have had a relatively flat churn rate this quarter, with 1.56% and 1.19% respectively. However, Sprint’s churn rate would have be around 1.39% after adjusting for effects of promotional period.
Question of Sustainability
While the data above may be encouraging, industry experts believe that the low churn rate may be exaggerated given that many high end launches are expected to take place in the coming months. Notably, the launch of iPhone 7 alone is anticipated to spike the churn rate in the coming quarters as the carriers are expected to boost up its promotional activities to gain customers.
Thus, the low churn rate might be more of a seasonal effect and hence may not be sustainable given high competition in the wireless industry. Notably, T-Mobile and Sprint are the more aggressive ones who target lowering the switching cost for customers following the launch of such high end smartphones.
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Wireless Churn Rate Hits Record Low: Is It Sustainable?
By focusing on customer retention rather than pushing customer addition through promotional campaigns, the wireless industry has seen its lowest level of customer churn rate in the second quarter of 2016. The industry churn rate at the end of this reporting quarter was 1.22%.
However, the same is anticipated to increase in the upcoming quarters when the major telecom carriers restore their promotional activities after the launch of several smartphones, particularly the iPhone 7 from Apple Inc. (AAPL - Free Report) . Customer churn rate displays the percentage of subscribers who cancel their services during a specified time period.
The Numbers
AT&T Inc. (T - Free Report) and T-Mobile US Inc. (TMUS - Free Report) , two of the top four wireless players, have improved their churn rate with rates of 0.75% and 1.27%, respectively, compared to 1.01 and 1.32% a year ago. Meanwhile, Sprint Corp. (S - Free Report) and Verizon Communications Inc. (VZ - Free Report) have had a relatively flat churn rate this quarter, with 1.56% and 1.19% respectively. However, Sprint’s churn rate would have be around 1.39% after adjusting for effects of promotional period.
Question of Sustainability
While the data above may be encouraging, industry experts believe that the low churn rate may be exaggerated given that many high end launches are expected to take place in the coming months. Notably, the launch of iPhone 7 alone is anticipated to spike the churn rate in the coming quarters as the carriers are expected to boost up its promotional activities to gain customers.
Thus, the low churn rate might be more of a seasonal effect and hence may not be sustainable given high competition in the wireless industry. Notably, T-Mobile and Sprint are the more aggressive ones who target lowering the switching cost for customers following the launch of such high end smartphones.
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