AT&T CFO John Stephens this week talked up the operator’s give attention to preserving the purchasers it already has, together with via gives that present the chance to bump present subscribers into larger tier plans or signal on to companies like HBO Max.
Talking at a Citi investor event about how he sees the enterprise going ahead, Stephens, who’s retiring this 12 months, mentioned he feels sturdy about momentum on priorities like 5G wi-fi and fiber, in addition to the “relentless buyer focus we have now.”
AT&T already has sturdy property in place, he famous, due to 5G community investments with deep low- and medium-band spectrum holdings and FirstNet spectrum, an intensive 15 million fiber-to-the-prem footprint, and content material library and platforms like HBO Max.
Shifting forward, it’s all about “these resilient, dependable subscriber relationships.”
Churn has been low throughout the trade and Stephens maintained that preserving present prospects is one of the simplest ways to develop a subscriber base. For wi-fi, AT&T lately revamped its in-store and on-line retail service and supply techniques. When the 5G-capable iPhone 12 got here out, AT&T put out an aggressive provide that it made obtainable to present prospects in addition to new ones. It had already began providing offers on 5G Samsung smartphones to present and new subscribers in August.
“Is it a aggressive provide, completely,” Stephens mentioned Tuesday. “Is it a rational provide, completely.”
He famous that prospects signal on for a 30-month tools installment plan (EIP) and these are subscribers that AT&T already is aware of the churn and cost histories of.
“They’re going to stick with us, they’re going to pay us, and we get a commerce in cellphone,” he mentioned. And the technique to spend money on retaining them advantages AT&T not solely in sustaining a base the service can depend on to remain and pay on time, but additionally extracting extra worth.
“On prime of that we get the chance to promote them up, whether or not it’s including HBO Max, whether or not it’s going to the Limitless Elite packages,” Stephens mentioned. “It’s actually a win-win for them and for us. And so we consider it as an funding in these prospects, however these are our greatest prospects.”
AT&T is seeing continued constructive momentum, in line with Stephens, and is happy about outcomes fourth quarter investments are displaying. Stephens pointed to third quarter wi-fi postpaid provides as proof earlier efforts have been paying off.
In Q3 AT&T recorded 1 million internet postpaid wi-fi additions, together with 645,000 telephones. The service will report fourth quarter earnings on January 27. On Wednesday T-Cell reported preliminary Q4 metrics together with 824,000 postpaid cellphone internet provides.
When requested by Citi analyst Michael Rollins if there’s an outsized price to the client retention program, with some gives that give sure subscribers as much as a $700 invoice credit score for a brand new cellphone, Stephens mentioned it’s affordable for the long-term worth.
Together with the prospect to upsell, it means AT&T may add extra telephones, gadgets and different strains from these present subscribers.
“In addition they have to offer a trade-in, which offsets a few of that price they usually make a 30-month dedication to us so churn may be very low.”
“From a price perspective, is there a price, certain … is it a really affordable funding particularly for the impacts on reducing churn? Oh undoubtedly we imagine so,” Stephens mentioned.
30-month system installment plans
In November Wave7 Analysis flagged traction within the choice for 30-month EIPs, and principal Jeff Moore instructed Fierce the market evolution towards what he categorized as a “megatrend” is on monitor.
AT&T has been doing 30-month EIPs for some time, dropping 2-year financing for the six-months long term EIP greater than a 12 months in the past.
For the reason that 5G-capable iPhone got here out, T-Cell provided 30-month system cost choices throughout three fashions. Wave7’s December postpaid report confirmed Verizon providing a 30-month cost choice on its costliest smartphones, together with the iPhone 12 Professional, 12 Professional Max, Galaxy Z Fold2, Be aware 20 Extremely, Be aware 20, Galaxy S20 and GS20+.
“The share of telephones activated on 30-month plans in late 2020 in comparison with the share two years in the past in 2018 can be a dramatic distinction,” Moore mentioned. Though 24 months continues to be essentially the most outstanding and obtainable for the lion’s share, newer telephones account for many activations.
Partially, Moore cited in a response to pricier gadgets, just like the Samsung Galaxy S20 sequence.
“You may have all of those actually costly telephones and there’s just a bit little bit of sticker shock when you take a look at what it prices when you solely finance it throughout 24 months versus 30 months,” he mentioned.
Roger Entner, principal and founder at Recon Analytics, echoed the same sentiment final fall, in that for the client, what it actually boils all the way down to is affordability.
“As system costs are getting larger and better, you need to get the month-to-month installment worth on the identical fee, and a technique to try this is finance that over extra months,” Entner mentioned.
In Entner’s view, the patron doesn’t care how costly that cellphone is, in the end, be it $700 or $1,200. “That’s a ‘Mickey Mouse’ quantity,” he instructed Fierce. As an alternative, he thinks shoppers need to see that month-to-month system cost hover across the identical quantity.
Carriers have all performed round with longer tools installment plans. Verizon, for instance, at one level provided a 36-month cost plan for the Galaxy Be aware 10+ 5G.
Whereas spreading system funds over a long term lowers the month-to-month fee for shoppers, Entner famous it additionally comes with the unintended penalties of elongated handset improve cycles (a adverse for OEMs) or carriers closely subsidizing trade-ins.
Since tools gross sales don’t account for the most important share of income, he doesn’t assume a subscriber holding a cellphone for an additional six months has a lot affect on carriers. And as Stephens has referenced at investor occasions, it means they’ve signed on with the service for an extended interval.
And getting new telephones into subscribers arms is very essential when there’s a expertise shift (ie 5G networks) or new spectrum.
“[Carriers] need folks to benefit from that, and which means a brand new handset,” Entner mentioned, noting aggressive subsidies like AT&T has executed are one approach to go.
Within the face of flat or declining revenues, carriers must decrease the price of delivering service so as to be extra worthwhile, he mentioned, one impetus for deploying 5G.
“The carriers are doing their finest to create a brilliant cycle by these very aggressive subsides in order that prospects can benefit from these new networks and that the price of offering connectivity to those folks will get decrease and subsequently it turns into extra worthwhile,” Entner mentioned on the time.