July 23, 2008 Phone Giants Fight to Keep Subscribers By LAURA M. HOLSON NY Times
http://www.nytimes.com/2008/07/23/technology/23phone.html?ref=business&pagewanted=print With millions of people snapping up the iPhone, AT&T, the exclusive carrier for the popular phone, should be quite pleased with the stream of revenue it can expect from customers. But AT&T, the biggest telecommunications company in the United States, has a problem: analysts say consumers are dropping traditional landlines faster than expected. The company, which still gets 32 percent of its revenue from its landline business, reports its second-quarter financial results Wednesday and is expected to talk about how its traditional phone service is contracting. AT&T is not the only company facing a changing environment in the communications business. All of the major telecommunications companies AT&T, Verizon and Sprint Nextel are figuring out how to make more money from customers as they spend more time sending text messages or browsing the Web on their wireless phones, rather than talking. At the same time, as the American cellphone market gets saturated nearly 85 percent of American consumers already own a mobile phone phone companies are finding that growth is slowing. With more options, mobile phone buyers are also becoming more selective about the calling plans and the type of phones they want, making the market even more competitive. In short order, sentiment in the telecom sector has gone from bullish to guarded to ... well, slightly queasy, Craig Moffett, a research analyst at Sanford C. Bernstein & Company who follows communications companies, wrote in a recent report. Wireless phones are, by far, more common than landlines. According to CTIA, the wireless industrys trade group based in Washington, there are 262 million wireless subscribers in the United States. In contrast, the Federal Communications Commission counts 163 million business and residential landlines as of June 2007, its latest report. Analysts say that AT&T will report a decline in the number of its traditional landline subscribers. A spokesman for AT&T said executives could not comment ahead of earnings. Currently the company has 60.4 million traditional landlines in contrast to 68.7 million subscribers in the second quarter of 2006 and 71.4 million wireless subscribers. AT&T has been losing landline subscribers each quarter at an accelerated rate since 2006. It dropped 7.4 percent in 2007. Analysts think that the economic downturn could also have an impact on the landline business. They say consumers looking to cut expenses will drop their landline which can cost up to $60 a month before they drop their wireless phone plan. I think AT&T is pedaling as fast as it can to transform themselves from a wire line to a wireless company, Mr. Moffett said. To a degree it is working. The question, though, he said, is is it fast enough? Analysts also expect it will report slower growth in its wireless business as well. Verizon, which reports its second-quarter results on Monday, also is seeing slower growth. On Tuesday, Verizon Wireless said it added 1.5 million subscribers in the second quarter of 2008, the same number it added in its first quarter. Both numbers are down, though, from the fourth quarter in 2007, which was two million new subscribers. Verizon Wireless, which is a partnership between Verizon and Vodafone, has 68.7 million subscribers. Its still very strong, said Roger Entner, a senior vice president for Nielsen IAG, a market research firm. But compared with earlier figures, he said, it is indicative of a slowdown. Verizon, too, is not immune from customer losses in its landline business. According to the report by Mr. Moffett, Verizon is vulnerable in the East Coast where it has a high percentage of customers. Despite the loss of customers, companies will still need to spend to upgrade their networks. (Verizon currently has 40.5 million traditional landlines.) A spokesman for Verizon said executives were not available to speak until its financial results were announced. Mr. Entner said AT&T and Verizon would have to sell customers more services to make up for the decline in traditional landline revenue. It is why they, particularly Verizon, are aggressively competing with cable companies to sell Internet and television services, bundled with traditional and wireless phone service. If you own a home business, they are going to want to sell you not only a line for your home, but one for your office too, Mr. Entner said. They are going to want to sell you more, more of everything. Keeping customers, along with acquiring new ones, is of paramount importance. Sprint, the No. 3 wireless carrier in the United States, has sought to stem the tide of customer defections of its wireless service. In the first quarter of 2008, 1.1 million of Sprint Nextels 53.9 million customers fled, and churn a measure of turnover and therefore how unhappy customers are was on the rise. It announces its financial results on Aug. 6. The big carriers have fed on Sprint Nextel, Mr. Entner said. But there comes a time when all the people who want to leave have already left. A bright spot, at least in the case of AT&T, is the debut of the latest iPhone. With a subsidized price of $199, it is sure to attract new customers, said Walter Piecyk, an analyst with Pali Research. Economically, it turns out great for them, he said, because new customers are required to sign a two-year contract to get the subsidized price. Carriers are seeking to address declining revenue in the landline business several ways besides focusing on the wireless business and bundling calling plans with Internet and television service. It would not be inconceivable, said one telecommunications executive who declined to be named because he was not authorized to discuss his companys plans, that in the next 10 years, carriers could entice their least profitable landline customers to give up their old-fashioned phones for free or deeply discounted wireless service. ================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 antunes at uh dot edu ******************************* * POST TO [EMAIL PROTECTED] * ******************************* Medianews mailing list [EMAIL PROTECTED] http://lists.etskywarn.net/mailman/listinfo/medianews
