July 25, 2012
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.