Subscriber Growth Still Matters

Some observers might argue that the mobile industry errs when it continues to measure progress, in part, as a function of subscriber volume (number of accounts or users). In some ways, that makes sense.

The corollary is that in many markets, even organic growth might be secondary to growth by acquisition. Still, how to measure organic growth remains an issue.

Fixed network operators long ago started to emphasize revenue units or revenue per account, especially since it became clear that “subscriber growth” was likely to become muted. In other words, revenue sold to a smaller number of customers, rather than revenue earned by gaining customers, was the salient metric.

Mobile service providers are starting to move that direction as well. Verizon Wireless no longer reports “revenue per user (subscriber)” but only “revenue per account.” In part, that is preparation for a new wave of growth fueled by devices with lower average recurring revenue, including tablets and sensors (Internet of Things or machine-to-machine services).

To be sure, service providers also can grow the amount of revenue they earn from each account, but the driver remains the number of subscriber accounts, at least in terms of what can be accomplished organically.

If the market is largely a zero-sum game, so long as a firm does not lose customers, it gains primarily by growing revenue per account.

On the other hand, a focused effort to protect or acquire some accounts might be among the most-lucrative ways to affect revenue. For starters, some accounts, especially multi-line “family accounts,” are more resistant to churn, but also feature higher revenue.

Parks Associates consumer data show that almost 50 percent of U.S. mobile phone service customers did not change providers over the last 10 years. A disproportionate share of those accounts likely are family accounts.

According to Parks Associates, about 25 percent of respondents changed service providers only once in 10 years. So 75 percent of the market is highly resistant to change.

Just 13 percent of respondents switched providers three times or more (about once every three years or so).

That suggests the real battle to shift consumer allegiance would be fought over about 13 percent of customers. Under those conditions, any significant change in postpaid market share will be a stubborn affair.

But anything that dramatically affects propensity to change, especially for the churn-resistant family accounts, would be significant.

According to the CTIA, the average revenue per user in 2012 was about $49 a month. But Verizon Wireless average revenue per account was much higher, about $153 a month, on the strength of its large base of family accounts.

AT&T does not report revenue per account, though AT&T reported average revenue per wireless customer of $65 for the fourth quarter of 2012. But analysts at Cowen and Company peg the average AT&T account bill at $141 per month.

The Cowen survey also found that 68.5 percent of postpaid respondents were paying for family plans, with 26.1 percent on individual plans and 5.4 percent on corporate plans.

An older 2011 survey by PriceWaterhouseCoopers suggested perhaps 47 percent of accounts were family plans. The percentage of AT&T Mobility and Verizon Wireless accounts undoubtedly was higher, even then.

The point is that changes in subscriber numbers still matter, but matter most if something happens to increase subscriber propensity to change service providers, especially among the higher-value family accounts.