Service Providers Could Lose Up to 1/2 of Their Customers in 12 Months

Telecommunications service providers might lose as much as half their current customers in one year, a new global survey by Ovum suggests.

The survey of 15,000 consumers and 2,700 enterprises in 15 major global markets found that only about half of surveyed customers definitely had no plans to leave their current suppliers.

About 25 percent of all users globally say they will definitely change providers within 12 months, while 25 percent reported they might do so.

Those findings are not necessarily unusual, even if, in markets where the triple play offer is standard, customer churn rates are far lower, on the order of 12 percent to perhaps 15 percent annually. That tends to be true, in the U.S. market, for example, for the largest service providers, including AT&T, Verizon and Comcast.

Churn rates for smaller service providers still are in the 24 percent to perhaps 36 percent range.

Two decades ago, churn rates for constituent triple play services--even at the biggest companies--could range as high as 36 percent annually.

But results vary widely by market, and likely are highly affected by the degree of product bundling.

The 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. In contrast customers of Vodafone Germany or NTT DoCoMo in Japan are much more loyal, with only about 10 percent indicating they plan to switch operators, Ovum reported.

The survey shows that the quality of the mobile broadband experience is the leading driver for mobile customer churn rates, with 37 percent of consumers globally saying that they either have left or plan to move to another provider because of slow connection speeds.

“When we asked consumers to rate a range of activities on a scale from ‘essential’ to ‘unimportant’, browsing the Web came top, with nearly 6 out of 10 consumers rating it as essential,” said  Angel Dobardziev, Ovum practice leader.

Watching TV was rated by only three out 10 consumers as essential, scoring as less important than reading the news (50 percent of consumers), reading a book (45 percent) and listening to music (42 percent).”

The Ovum findings illustrate one leading problem for service providers in most markets, namely the impact of competition. The other, and strategically more dangerous problem, is abandonment of services such as fixed network voice and mobile text messaging, or the beginnings of a potential abandonment of linear subscription video.

Losing customers to a competitor is a key problem. Disinterest in a product category is more dangerous, long term.