U.S. Cellular to shut down 'Rewards' program for customers on Sept. 1

U.S. Cellular (NYSE:USM) is killing off its "Rewards" program for its customers this summer, presumably so that it can save money to keep expanding its network and maintain its pricing.

In a filing with the Securities and an Exchange Commission and an FAQ on its website, U.S. Cellular detailed why it is making the changes and how customers will be affected. All Rewards-eligible customers will be impacted by the change.

"The decision to phase out the U.S. Cellular Rewards program was made with careful consideration and input from many of our customers," the company said on its website. "This decision to phase out the Rewards program will also allow us to bring our customers more of the things that matter most to them: coverage that works across the country, a network that works better in unexpected places and a value that's better than Verizon and AT&T."

U.S. Cellular said in the SEC filing that discontinuing the Rewards program will let it better focus on delivering "customer service excellence, the newest devices and the best overall value."

Customers will continue to earn Rewards points through April 30 for Rewards-eligible activity and will still be able to redeem Rewards points through Sept. 1. After that date, customers' Rewards accounts will be closed and any unredeemed Rewards points will expire and the program will be officially discontinued.

Under the Rewards program, customers can use points for faster phone upgrades, discounts on devices or accessories, get device activation fees waives, and get tickets to events and memorabilia.

In the SEC filing, U.S. Cellular said it is currently "unable to reliably estimate the financial benefit to its 2015 results of operations of discontinuing the Rewards program. Revenue will increase due to the deferred point balance being recognized, but redemption rates and how redeemed points are used as the program winds down are uncertain and could vary widely."

There might be some negative effects of U.S. Cellular getting rid of the Rewards program, as the carrier anticipates having to guard against churn. The carrier said that "direct and indirect costs related to ending the program including temporarily increased customer service staffing levels, customer churn, and churn mitigation programs could be significant and also could vary widely." 

"The company will continue to provide innovative plans, products and services that will provide customers with exceptional value above and beyond the Rewards program," U.S. Cellular said.

The timing of the decision is somewhat inopportune for U.S. Cellular. AT&T Mobility (NYSE:T) announced this week it is partnering with major brands including ExxonMobil, Macy's, Nationwide Insurance, Rite Aid, Direct Energy and Hulu to launch a new loyalty rewards program. The program, called "Plenti" and powered by American Express, will let customers earn and redeem points at any of the merchants in the coalition. The Plenti program is going to formally roll out nationwide in May and will be free to join. Verizon Wireless also offers a rewards program.

Last month U.S. Cellular reported that it managed to grow its postpaid customer base in 2014, the first time it has been able to do so since 2009.

For more:
- see this SEC filing
- see this U.S. Cellular page 

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