It is a commonplace observation that the largest four U.S. mobile service providers are differentiated on the dimensions of churn and average revenue per account. Basically, Verizon Wireless and AT&T Mobility customers churn at half the rate of Sprint and T-Mobile US customers.
But there might also be a significant differentiation based on why customers choose their service providers.
When Cowen and Company analysts asked customers why they chose their service provider, AT&T and Verizon chosen for "network coverage and quality,"
Sprint was chosen for "unlimited data plan and better price," while T-Mobile US likewise was chosen for "better price and unlimited data plan.
The distinctions are clear: customers who value coverage and quality tend to buy AT&T and Verizon. Customers who value unlimited data and price chose Sprint and T-Mobile US.
So the question, assuming you believe a big marketing war will escalate, is how big each of those customer segments are. For that might limit the gains either Sprint or T-Mobile US can gain and hold, over the long term.
It will be easier for AT&T and Verizon to match price offers than for T-Mobile US and Sprint to dramatically expand their footprints.
But all that assumes no major change in market structure. With the possibility that something happens with T-Mobile US (merger with another provider), and if Dish Network does enter the market, along with activation of assets from one or two of the mobile satellite firms that want to repurpose their mobile satellite spectrum, tomorrow's market could look different.
But that will occur within a context where it appears customers fall into two broad camps: buyers who value coverage and quality, even at higher price; and customers who value unlimited usage and want lower price.
Coverage might not matter for the latter, while lower price, while helpful, still is not why the former customers make their fundamental choices.
How much the contestants can structure their operations to attract the "other" type of customer will become a bigger issue.
Friday, January 17, 2014
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