U.S. Cellular targets contract customers with new initiative

Looking to re-establish its position in the space, regional wireless operator U.S. Cellular Corp. (USM) unveiled a number of new customers initiatives designed to retain and attract mobile customers increasingly dissatisfied with current carrier methods.
The new initiative, bundled under the ambitiously titled “The Belief Project” and set to launch on Oct. 1, include new rate plans, contract terms and a points system that customers can use to further enhance the offering. The plans are all contract-based, leaving aside the increasingly competitive no-contract segment that has introduced increased volatility in customer churn numbers across the industry.
The U.S. Cellular initiative is centered on new rate plans, dubbed “Belief Plans,” that for single lines are labeled Basic, Essential and Essential Plus for plans with a limited bucket of calling minutes, and Unlimited Basic, Premium and Premium Plus for plans with unlimited calling minutes. The carrier also is offering new family plans under the same names.
The new plans are generally inline or cheaper than the carrier’s current offerings, depending on the number of lines selected on family plans, as well as undercut similar offerings from most of its larger rivals. The price of the new plans can also be cut by up to 5% if a customer signs up to have their monthly bill automatically deducted from a checking or savings account and paperless billing. Those who pay with a credit card or debit card can save up to 3% each month.
Perhaps the most differentiated aspect of the initiative is what U.S. Cellular is calling its “One and Done” contracts that do not require customers to sign a new contract once their initial two-year agreement is completed yet still receive the benefit of fully subsidized device upgrades at least every 18 months. Carriers typically require customers to sign a new contract when receiving a subsidy for a new handset on postpaid plans. Customers that are currently not on a new Belief plan but that have already fulfilled their current contract can switch to the new plans without having to sign a new contract.
Also along the device front, customers that sign up for either the Premium or Premium Plus plans are covered under a phone replacement policy that allows them to receive a new device if their device is “accidently” broken or malfunctions or pay a $100 fee for a new device if their phone is lost or stolen.
Customers on the new plans also automatically collect “Belief Points” that can be redeemed for earlier handset upgrades, downloadable content and forgiveness of overage charges. The number of points collected vary depending on the customer’s rate plan, the number of lines on an account and how long they have been a customer. U.S. Cellular notes that redeeming points can result in receiving handset upgrades at fully subsidized prices in as little as 11 months.
The new plans will also continue to include the carrier’s other incentives like free contact back up, battery replacement and free incoming calls and messages.
While the new offerings run the risk of diluting revenues if customers choose to redeem full handset subsidies and then churn shortly after, U.S. Cellular EVP of Operations Alan Ferber said the carrier’s research showed customers are more likely to remain loyal because of the benefits they attain with the new program.
“The plans may seem risky, but that same customer would have to walk away from everything we offer,” Ferber explained.
U.S. Cellular said it expects the plans to have a long-term positive financial benefit for the carrier, will drive incremental postpaid gross additions by at least 10%, increase average revenue per user and cut down on postpaid customer churn. Those benefits and expenses have also already been calculated into the carrier’s 2010 financial guidance.
U.S. Cellular reported that it lost 22,000 contract customers during the second quarter due to falling gross customer additions. The carrier’s postpaid churn remains fairly low at 1.4%.