February 28, 2005

Following a record-setting year for customer growth, a new report from Compete and Bear, Stearns found that continued growth in the wireless industry likely will come from untapped market segments that may not prove as financially rewarding as the saturated early-adopter segments.

The report, "Characteristics of Wireless Subscribers and Non-Users," found that new and non-wireless subscribers plan to spend an average of only $30 per month for their wireless service, which is well below the approximately $50 per month spent by wireless subscribers.

The study also noted that attracting new customers probably will cost more than what it cost to acquire current customers in both marketing costs and subsidies.

"In this study we found that new adopters of wireless services will generate less revenue than experienced subscribers," said Compete's director of wireless practice Adam Guy.

"Understanding the unique characteristics of these late adopters will be key to focusing on squeezing profits of new customers."

The report also found that potential wireless subscribers eventually are most interested in signing up for service for safety reasons and to keep in touch with family members.

Both segments typically produce lower average revenue per user as people concerned with safety usually purchase the less-expensive amount of minutes per month or select a prepaid option, while customers looking to keep in touch with family can take advantage of low-cost family plans that often include free on-network calling.

In addition, the report noted that carriers looking to tap such segments might be better off financially offering lower operating cost hybrid-type wireless plans or family plans rather than traditional prepaid offerings, which the report added should be left to mobile virtual network operator partners.

For current subscribers, the report found that service pricing and network issues are seen as the most likely reason for customers to churn, though more long-term subscribers cited network issues as being more important than pricing when selecting service providers.

Source: RCR News