AT&T Customers Are Sticking Around, No Matter What They Have To Pay
Michael Harper for redOrbit.com – Your Universe Online
AT&T, who gave their third quarter earnings call yesterday, posted a healthy profit, saying they were encouraged by their customer’s loyalty, despite the fact that the cost of wireless data plans have increased. In fact, AT&T’s profits rose by 8.7%, their most profitable quarter ever, due in part to an extreme number of smartphone users.
AT&T said a majority of their customers are on a smartphone plan, and as these devices become more popular, more of their customers are not only willing to continue paying for data, they’re also sticking with their mobile carrier rather than shopping around.
As a testament to these customers’ willingness to stick around, AT&T reported a record low churn rate—the rate at which customers leave a carrier— of .97%.
AT&T took some risky moves in the past year as they tried to leverage their customers’ love for data to boost their profits. For example, AT&T began the year by announcing they would raise the price of data for new customers to $20 for 300 megabytes, $30 for 3 GB or $50 for 5 GB. Previously, customers could buy 200 megabytes for $15 and 2 GB for $25. Customers end up paying slightly less on a per megabyte basis with the new pricing, even though the package prices are larger than before.
In February, Big Blue announced they would be doubling their upgrade fee, from $18 to $36, in order to keep in line with today’s “sophisticated” wireless devices. Sprint also charges a similar fee for those users who want to upgrade at the end of their contracts, while Verizon does not charge any upgrade fee.
Perhaps most controversially, AT&T also announced they would begin to throttle their users’ data speeds when they went over their allotted data usage. This throttling has not only helped ease the load of their data networks, it’s also been a clever, if not cunning, way to shift users with older, unlimited plans to their new, more profitable ones.
Now, AT&T has said 27 million of their smartphone users are on the company’s tiered data plans, 70% of which have opted for the high end packages. Despite all this shuffling of prices and increased fees, customers haven’t left, a fact which seems to have surprised John Stephens, AT&T’s chief financial officer.
“Those extraordinary consumers have been addressed, and that process has been in place for more than a few months now,” said Stephens.
“Quite frankly, once again, I look to churn as an indicator of how that’s being accepted and how that’s impacting our customer base, and we feel good about the progress we made there.”
All told, AT&T was able to sell 5.1 million smartphones last quarter, adding 320,000 contract subscribers, each paying an average of $64.93 per month.
Apple had a strong showing in these smartphone numbers, as AT&T said 3.7 million of their 5.1 million total were iPhones. Twenty-Two percent of these iPhone users were new to the company, leaving other carriers for AT&T.