Operators are continually threatened by adverse market conditions impacting their profitability. Falling voice ARPUs have yet to be balanced by the growth in data revenues, but there is increasing confidence that the opportunities being presented by the non-voice world, for example machine-to-machine technology, could become the next cash cow.
What also seems to be fading as a long-running problem for operators is churn.
While the number of subscribers switching to another service provider remains a problem for some European and U.S. operators, the problem would appear to be decreasing. According to the market research firm Analysys Mason, a recent study covering the United States and major European countries found that the number of mobile subscribers that were planning to switch operator had decreased from 14 per cent in 2009 to just 9 per cent in 2010.
Interestingly, the firm claims that this dramatic reduction was due to two simple factors: stable tariffs and longer contracts.
The speed with which prices have been falling has decreased in a majority of the markets surveyed, leading to subscribers being less motivated to switch to a competing operator for a better offer. While operators will continue to compete on voice tariffs, the difference is now significantly less with the smaller saving not worth the users' efforts of churning to another provider.
Also, the average postpaid contract, according to Analysys Mason, has increased from 17 months in the UK during the second quarter of 2009, to over 18 months a year later. This willingness to enter into long-term contracts is likely to have been helped by prices becoming more stable.
However, while the battle to reduce churn might appear over, the market research firm warns against complacency.
The next battlefield for operators will be holding onto subscribers as mobile content and applications become evermore important to users. Those that are able to devise unique and attractive services could tempt other subscribers to churn simply to have access to exclusive content. This investment in distinctive data services should also stop existing subscribers from looking elsewhere.
Worryingly, Analysys Mason claims its research found that 25 per cent of iPhone owners would switch service providers to gain access to specific content and applications.
So, operators will need to think less about pricing as a mechanism to retain customers, and more about their services' overall proposition. And this time the competition is not just other telecoms providers, but the likes of Google and Apple.--Paul