Operators Should Focus On Core Business—Analysts

• Posted by James Quintana Pearce
• Fri 12 Jan 2007 07:51 PM

Rasmus Wegener and Pratap Mukharji, Atlanta-based telecom consultants for Bain & Company, claim that carriers should spend more money on reducing churn than on introducing new services, reports Forbes, because there’s more profit that way. “The most profitable customers are people like our parents and grandparents--people who have a cellphone but it’s actually a backup phone. They have a price plan that they signed on five or six years ago that they haven’t changed--one of the high priced plans--and they use their phones sometimes; not too frequently. They don’t roam. They certainty don’t send text messages, they’re highly, highly profitable--they don’t call the wireless company, they don’t have billing issues.” The argument seems to be that people who pay $50 per month for a service they hardly use are more profitable (although generate less revenue) than people who pay $100 per month but are heavy users of the service. Hence carriers would do better to focus on reducing churn, with the analysts estimating that carriers could boost profits by 15 percent by reducing churn by 20 percent.
The problem is that telcos want to be seen as growth companies, and in mature markets there’s no growth in subscriber acquisitions so they have to look elsewhere. Gartner gave some similar advice this morning.