Nothing sparks churn like competitors having a high-profile feature you don’t.
That’s the situation in which Verizon Wireless and Sprint now find themselves. Of the big four U.S. mobile operators, T-Mobile struck first in the rollover data space with Data Stash, a program that accumulates customers’ unused data and holds it for a year.
AT&T’s Rollover Data (trademark pending) arrived shortly after. AT&T’s program differs from T-Mobile’s in that rollover data expires after one month but it can be used on a shared basis across multiple lines on one account.
With T-Mobile’s program already off and running and AT&T’s starting in less than a week, the next two biggest competitors are at a crossroads. Verizon and Sprint can sit back and watch the market reaction to the new feature before making a similar move. But if they wait too long they could suffer subscriber losses or at least experience a drought in the flow of AT&T and T-Mobile defectors.
A response is necessary
Sprint and Verizon have to respond, especially given the rapid pace at which T-Mobile is adding new customers, J. Gold analyst Jack Gold told Tech Times.
Verizon has already responded. During the carrier’s fourth-quarter earnings call Thursday, CFO Fran Shammo said Verizon is drawing a line in the sand in the industry’s ongoing price war.
“There were certain places that we just did not want to go in order to retain a customer,” Shammo said, potentially throwing cold water on Verizon following suit in the rollover data game.
Recon Analytics’ Roger Entner said that Verizon or Sprint could feel it on the churn side but not in terms of customer acquisition.
“Nobody joins a carrier because they have [rollover data],” Entner said. “If that had been the case, then Cingular Wireless [with rollover minutes] at that time would have been imitated by everybody. But [rollover minutes] largely created a massive yawn from everybody.”
Entner said that rollover minutes became the centerpiece of Cingular’s marketing for a while and there are concerns about the impact a similar marketing focus on rollover data could have for present-day AT&T.
Zacks’ analysts said that an increase in marketing expenses at AT&T could lead to reduced wireless margins.
Even with the potential pitfalls—and an already low churn rate—Verizon could still potentially jump into rollover data if wireless subscriber growth slows and rival carriers’ subscribers become harder to lure away.
Don’t stray too far from the pack
Lynnette Luna, principal analyst at Current Analysis, thinks if Verizon ultimately chooses to follow, the carrier would do well to launch the same rollover data program as AT&T and continue to rely on the marketing message behind its strong network.
But with churn higher for Verizon in its recently reported fourth quarter, Luna says the carrier needs to start reacting sooner.
Sprint has much less margin for error than Verizon. The carrier is currently struggling to stay ahead of a surging T-Mobile in total subscribers and playing catch up on LTE coverage. Even still, Entner feels Sprint will point to its unlimited offering as a superior deal, one that makes rolling over data superfluous.
“Rollover to a certain extent is like unlimited light,” Entner said.
Susan Welsh di Grimaldo, director of Wireless Operators & Networks at Strategy Analytics, said there are examples outside of the U.S. where rollover data can have wider service applications than unlimited plans.
In some Asian markets, di Grimaldo said there are ways to gift unused data to other subscribers and there are also way to trade in unused data for things like in-store credit and device upgrades.
But di Grimaldo sees giving customers more value, flexibility and a proper amount of control over the data they have instead of stashing away the data they don’t use could be a better approach. She says the industry needs keep helping consumers understand how much data they need, how do you cost-effectively add more data without hurting your budget, and how to you not pay too much by insuring yourself against overages by buying too much data.
With that in mind, di Grimaldo says Sprint’s customization options built into its ItsOn platform could set the carrier apart more than mimicking rollover data could. Sprint recently stopped using that option when it discontinued its Virgin Mobile Customer prepaid plans.
“I’d like to see them put something like [ItsOn] on a postpaid option,” di Grimaldo said, adding that that level of granularity could intrigue customers as long it’s made simple to use.
She said Sprint could put a data rollover option inside of something like ItsOn but just following with a standalone rollover data option won’t create the buzz the carrier needs right now.
Share and share alike
Of the rollover data plans out there now, though, di Grimaldo is a bigger fan of AT&T’s option because it allows for sharing unused data.
Luna also said AT&T’s option is superior because it’s best suited to encourage wireless consumers to start adding additional devices like tablets, wearables and connected cars to their plans because it provides a cushion against overages to accommodate extra connected devices.
But T-Mobile’s Data Stash just getting rolling and with AT&T’s Data Rollover still days away from its debut, it might be some time before the true impact of these programs on all the carriers can be measured.
In the meantime, Verizon might just as well hold its ground and Sprint can continue to look for its killer differentiator. If things get bad, there’s always time later for both carriers to play copycat.