Some Mobile Service Providers Might Lost Half Their Customers Over the Next Year

Some mobile operators risk losing as much as half of their customer base over the next 12 months, Ovum warns. That might even be a conservative estimate, when looking only at prepaid accounts that are the most-purchased services globally.

In practical terms, any single mobile service provider would have to have monthly churn about four percent for half the customer base to leave over a year.

Mobile service provider churn rates vary significantly, however. According to Strategy Analytics, mobile customers change providers every 27 months. Prepaid customers change providers about every 17 months (every 1.4 years).

Prepaid customers, on the other hand, churn about every 67 months (every 5.6 years), according to Strategy Analytics.

So gross churn, for a prepaid provider, might easily be half of the existing base over 12 months.

Since postpaid customer bases churn at much lower rates, the “typical” customer life cycle might be 1.4 years for a prepaid provider and 5.6 years for a postpaid provider. In some markets, postpaid customer lifecycle, especially for postpaid customers on shared or family plans, can be as long as eight years.  

So it is not unusual that about 25 percent of all mobile users globally say they will definitely change providers, while another 25 percent say they might do so, as Ovum reports. Most customers globally buy prepaid service.

If the Strategy Analytics figures are correct, more than half of prepaid customers might leave every year, with a monthly churn rate of perhaps six percent a month.

If respondents follow through with their expressed opinions, mobile service providers could risk losing as much as half of their existing customer base over the next 12 months, according to the Ovum global survey.

The Ovum forecast also might seem feasible only if gross churn, rather than net churn, is considered.

The Ovum survey finds that almost twice as many customers of Airtel India or LG U+ in Korea plan to churn more than the global average of 23 percent, Ovum says.

In contrast, customers of Vodafone Germany or NTT DoCoMo in Japan are less likely to desert their current service providers, with only about 10 percent indicating they plan to switch operators.

Dissatisfaction with mobile high speed access might be the driver, rather than experience attributes that relate to voice.

About 37 percent of respondents say they either have left or plan to move to another provider because of slow connection speeds.

The survey, which included over 15,000 consumers and 2,700 enterprises in 15 major global markets, also underlines the global importance of being online.

iPhone customers are much more likely to churn than users of competing handsets, mostly to find a provider with faster mobile speeds, the study also suggests.

Churn rates of about 25 percent over a year would not be unusual in the mobile business. But what really matters is “net churn,” the sum total of new customer acquisitions (including customers churning from other providers), less the number of current customers who leave.

By definition, churn describes the behavior of current mobile customers, who are quite unlikely to abandon use of mobile services altogether.

That said, there is a certain amount of uncontrollable churn, as when a customer dies, or moves from one country to another, or perhaps moves from an area where the current carrier provides good experience (signal strength, mobile Internet speed, dropped calls).

But nearly all customers who leave one carrier sign up with another. So net churn, even in markets with monthly prepaid churn rates between four percent and six percent monthly, might have net churn far lower than that, after accounting for new customers gotten from other providers in the market.