U.S. Cellular (NYSE:USM) said its recent billing system conversion, which has caused numerous headaches for the company and its customers, was necessary for it to monetize its LTE network and launch its first Apple (NASDAQ:AAPL) devices earlier this month.
Speaking at the Wells Fargo Tech, Media & Telecom conference, U.S. Cellular CEO Kenneth Meyers said that the billing system upgrade allows the company to offer shared data and subsequently launch the iPhone 5s, 5c and 4S, and iPad Air, to its customer base. "In order to do the iPhone as well as roll out shared data, we had to have a billing system conversion," Meyers said.
Meyers acknowledged that the rollout of the new billing system was not "as smooth as we had hoped." He also said that the billing system glitches caused an uptick in churn in the third quarter that will likely continue into the fourth quarter.
"This is a very complex system. It's a whole business system that includes customer service, operations," he said. "We have seen some increase in churn and will see it in the fourth quarter," he noted.
U.S. Cellular lost 71,000 customers in the third quarter, including 60,000 postpaid subscribers and 11,000 prepaid customers. The company is working with billing vendor Amdocs to fix the problems, which were first reported in July. According to a recent Milwaukee Journal Sentinel report, U.S. Cellular customers have been angry over receiving multiple bills in a short time with inaccurate balances or overcharges.
The lack of the iPhone also contributed to U.S. Cellular's churn, which Meyers said he hopes will be stifled now that the company has launched the Apple products. He said that in the fourth quarter of 2012, 40 percent of the voluntary churn in the company was due to it not offering the iPhone. "People left for the iPhone," he said.
Meyers also said that U.S. Cellular is once again requiring contracts, which he believes will also help reduce churn. In September, FierceWireless reported that U.S. Cellular was no longer using the "Belief Project" brand that it introduced two years ago, and had discontinued or changed many of the elements of the program. The main element of the Belief Project was the elimination of the requirement that customers to sign an additional two-year contract after they fulfill their first one.
The U.S. Cellular chief also said that the company's LTE network now covers 90 percent of its customer base. He said that with LTE network nearly complete, coupled with the billing system conversion, U.S. Cellular will be able to offer a more "meaningful data experience" to its customers, including offering Voice over LTE. When asked if U.S. Cellular is concerned about being able to monetize LTE, a fear that has prevented some smaller operators from deploying LTE, Meyers said that he believes LTE is a necessary upgrade carriers if they are going to continue to serve their customers and compete in the market. "If you don't believe in data, you don't go to LTE," he said.
When asked about the upcoming H Block spectrum auction, Meyers said that U.S. Cellular will likely sign up to participate in the auction but is still evaluating its options. He emphasized that the company's current spectrum holdings are strong because it has both high- and low-band frequencies, which gives it coverage and capacity. However, he added that in some markets U.S. Cellular does not have as much spectrum as it would like.
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