Though often regarded as the most important quarter of the year for wireless customer acquisitions and thus the most highly competitive, this year’s fourth quarter is expected to be particularly heated as carriers aggressively target customers disenchanted or confused by Cingular Wireless L.L.C.’s acquisition of AT&T Wireless Services Inc. Yet, while most of Cingular’s competitors have stated their desire to lure customers caught up in the acquisition uncertainty, analysts say those efforts have been modest so far.
A recent report from RBC Capital Markets noted that beyond a few tweaks, most of country’s larger wireless operators have made few changes to their rate plans over the past several weeks and only incrementally increased handset subsidies ahead of the upcoming holiday shopping season.
The report noted Verizon Wireless has continued its strong customer growth due to aggressive handset subsidies, while Sprint PCS was seeing increased in-store traffic as its recently expanded Fair & Flexible service plans gained traction among wireless customers. In addition, the report noted that Nextel Communications Inc. was benefiting from more aggressive handset subsidies as well as the increasing popularity of its postpaid spending-limit program, while T-Mobile USA Inc. was stagnating somewhat and in some cases losing momentum to its competitors ahead of the holiday season.
“We noticed few changes since September and expect holiday promotions to be announced within the next week at multiple carriers,” observed RBC telecommunications analyst Jonathan Atkin.
The calm is not expected to last for long. Many analysts predict most carriers will begin rolling out their holiday promotions imminently.
“I think it’s still a bit early for carriers to get too aggressive,” said N. Moore Capital Ltd. President Jeffrey Hines, who added that he thinks most operators are waiting until at least Thanksgiving before ratcheting up the pricing pressure.
The relative calm has provided a buffer for Cingular by giving the carrier a chance to further align its marketing efforts with AWS, which analysts have noted should be one of the highest priorities for the nation’s new No.1 carrier. Cingular, which initially said it planned to offer a more uniform offering by Thanksgiving, also expected to reinforce its initial marketing efforts surrounding its new “Raise the bar” tagline beginning this week with increased emphasis on the Cingular brand. Further integration of back-office services between the two is also planned.
“We expect to see initial signs of integration on Nov. 14 as the AT&T Wireless brand collapses into Cingular and the Cingular activation platform takes on the vast majority of new activations,” noted RBC’s Atkin.
Atkin added that the integration would include re-labeling AWS stores, advertising collateral and rate plans with the Cingular brand and that the efforts should help expedite customer transitions from AWS.
Cingular also has used the first several weeks following its acquisition of AWS to merge a handful of network and service offerings that should prove attractive to customers, including expanding its mobile-to-mobile calling offering to include Cingular and AWS customers and expanding its “home” footprint to include their combined networks.
In addition, Cingular quietly launched its Take Charge prepaid service, which is similar to AWS’ GoPhone offering. AWS’ prepaid effort made up a significant portion of AWS’ gross subscriber additions as it got closer to being acquired by Cingular. Analysts predict the GoPhone offering could get lost in the acquisition since GoPhone customers typically generated lower revenues and higher churn as witnessed by AWS’ third-quarter financial results.
Those concerns are also expected to be exacerbated this year as wireless local number portability is forecast to actually play a more important role during the holidays this year than it did in November 2003, when carriers were still working through the mandate’s implementation.
S.G. Cowen & Co. noted that number porting activations increased from 27 percent of all activations during the second quarter of this year to one-third of activations during the third quarter. The firm expects at least half of activations to involve ported numbers by the end of this year. S.G. Cowen found that Cingular and AWS customers accounted for nearly half of all wireless subscribers looking to port their number to a new operator.
“We continue to be concerned about [AWS] network quality, which has been cited as poor in every quarter we have performed the survey,” noted S.G. Cowen telecom analyst Tom Watts. “While other carriers’ ratings have fluctuated somewhat, more than 60 percent of respondents describe the primary reason for defection at [AWS] as network quality, in line with previous surveys-indicating no perceived improvement has been made to [AWS’] network in the 18 months.”
