Since November 2003, when rules allowed consumers to take their cellphone number to a new provider, Verizon Wireless added 1.5 million subscribers, the largest gain of the big six players. It also posted the best churn rate of the mass-market wireless brands-or the percentage of customers leaving a service-with an impressively low 1.7% for the quarter, according to Loop Capital Marketing, Chicago.
"We always had a network-quality message; local number portability didn't change that message," said Brenda Raney a spokeswoman at Verizon Wireless, which has built its brand on a them of network quality with its Test Man advertising campaign.
Also growing subscribers at a fast clip was youth-targeted value brand T-Mobile, with an additional 1 million consumers. Its churn rate, however, at 3.2%, was one of the highest in the business, second only to AT&T Wireless, which had a 3.3 % churn amid widely publicized problems with physically transferring numbers.
Making the third-largest rise was Nextel, largely regarded as a business-to-business player, picking up 553,000 customers in the fourth quarter with a niche product offering: its Push to Talk walkie-talkie-like service.
Sprint PCS and AT&T saw smaller gains. Analysts said because consumers viewed them as too similar, the carriers resorted to cut-rate deals to get customers-a move that bruised profits.
Verizon Wireless and AT&T offered free calls to subscribers on their individual service; AT&T has pitched free phones every year; Sprint has expanded its night hours from 7 p.m. instead of 9 p.m.; T-Mobile hyped free Friday calls.
Such offers come at a price. Andrei Jezierski, partner in tech consultancy i2 Partners, New York, said the effectiveness of ad spending for generating revenue in the sector is declining. "The yield the telecom companies are getting for each additional ad dollar is dropping precipitously because the market is so crowded," he said. "For every incremental ad dollar being spent, wireless carriers are losing $12 in revenue."
No big bang
A recent study by his firm of the ad spending of T-Mobile and AT&T Wireless found that their combined outlay in 2001 was $1.2 billion, yet the two carriers' revenue per incremental ad dollar dropped by $10. For 2002, combined ad spending jumped to $1.4 billion, yet revenue per incremental ad dollar was down by $13.
Telecom marketers' media outlay for landline local and long distance, cellphone and pagers service was $4.3 billion in 2002, according to TNS Media Intelligence/CMR. Spending for the first 11 months of 2003 was $4.43 billion, up more than $100 million from the entire previous year and without accounting for the important December holiday season, and up from $3.87 billion for the first 11 months of 2002.
With all that wireless spending, "There hasn't been any big-bang marketing shift" resulting from portability, Mr. Jezierski said.
Yankee Group analyst Roger Entner said far fewer than the anticipated 10 million to 12 million consumers ported their number, adding that switchers were limited to the "very dissatisfied" and opportunists looking for a better package. He said the rate of switchovers remained similar to the rate prior to portability, noting that all carriers' subscriber bases grew not because of switching alone but due to a 27% increase in mobile phone subscribers overall.
Bill Cram, analyst, Loop Capital Marketing, said the full impact of portability won't hit the wireless marketplace until the third quarter of this year, as it rolls out into rural areas. At the same time, a number of cooler phones likely to stimulate switching, particularly those from Motorola, didn't hit the shelves until after the holiday selling season. "If you're looking into a two-year contract, you want a nice phone," said Mr. Cram.