AT&T & Verizon Having a Hard Time Selling Cell Phone Contracts
Cell Phone Contracts
Analysts say that the two biggest wireless providers in the U.S.; AT&T and Verizon are having a hard time selling new contracts to cell plan subscribers. Although it is common for the beginning of a year to produce fewer new customers for the providers (due to the influx of new phones purchased around the holidays), analysts say this first quarter of 2010 will be particularly slow. The simple fact is; most people already have a cell plan.
The wireless industry’s trade association, the CITA, states that a whopping 90 percent of the adults in the United States already own a cell phone. In addition, due to the harsh financial times many customers are facing, they are opting for the less expensive, prepaid phone services and not renewing their 2-year cell plan contracts.
Contract customers, sometimes called postpaid customers, are valuable to wireless providers as they typically spend more on their wireless service. Additionally, these customers are locked into their contracts and pay early termination fees if they bail early. These fees play a major role in keeping those customers on board.
Prepaid Cellular Service
Prepaid cellular service customers on average spend much less per month on cell phone coverage. Being they do not need to sign a contract, they often switch providers if a better cell plan deal comes along. The recession has caused a significant growth in the prepaid market. The number of prepaid subscriptions for the first time grew faster than contract customers in the last quarter of 2009.
A handful of smaller providers, such as MetroPCS and Leap Wireless have built their entire business models around this growing prepaid market. We have also seen that the other larger carriers such as T-Mobile, Nextel and Sprint are vamping up the prepaid side of their business.
The Future of AT&T and Verizon
AT&T and Verizon’s first quarter numbers simply don’t look good; so what are they doing about it? AT&T continues to see growth as result of the ever-popular iPhone and it appears that is where they will lay their hat, for now. Though we can only assume that AT&T’s iPhone sales will suffer if the iPhone comes to Verizon as promised .
Correspondingly, the iPhone may prevent loyal Verizon customers from jumping ship and possibly attract new subscribers. Because it is too soon to put all of their eggs in the iPhone basket, Verizon is slowly working its way into the prepaid market with their StraighTalk service which is sold through Walmart.
Time will tell.
