Cricket and MetroPCS, two companies which had strong first quarters followed by not so strong second quarters. Cricket added 203,000 net subscribers in the second quarter, down from 493,000 in the first quarter. MetroPCS gained 206,000 subscribers, a far cry from the 684,000 it added in the first quarter. Both companies had churn issues, as Cricket turned over 4.4 percent of its subscriber base, while Metro shed 5.8 percent. Leap COO Al Moschner explains why his company, and probably Metro too, saw such a high churn rate.
“Most of the reason for the churn-increase is our customers’ ability to pay their bills. We see that rate increase in the second and third quarters, and we see that reverses in the first and fourth quarters when cash tends to be more available for these services.”That kind of activity is expected in the prepaid sector. Contract carriers tend to have a far lower rate of churn. In fact, contract carriers might have hurt Leap and Metro this past quarter. Chandan Sarkar, analyst at Auriga USA, explains: “AT&T and Verizon have done a better job than we expected in terms of defending their existing customers.” In this environment, that’s the difference. With the market nearly saturated, the game is about taking subscribers from other carriers. If contract carriers are holding onto their customers, prepaid carriers suffer.]]>
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