AT&T’s Chief Operating Officer Jeff McElfresh was asked at today’s UBS Global TMT Conference whether the company’s wireless device promotions were sustainable.
For a couple of years, AT&T and the other big U.S. wireless carriers have been providing heavy subsidies for smartphones in exchange for customers agreeing to installment plans that often result in them staying with the companies for longer terms.
McElfresh today indicated that AT&T is happy with the results of those phone subsidies.
“I’m not sure how many quarters are required before that question gets answered,” he said, adding that the promotions have resulted in record-level low churn, and AT&T’s wireless volume and activity is strong.
He said the device promotions are a result of “deep research” the company conducted a couple of years ago, where AT&T subscribers said, essentially, “you need to be investing in me as aggressively as you’re investing in earning others’ business and loyalty.”
The device promotions and the approach to phone customers, in general, is something that AT&T’s General Manager for Mass Markets Jenifer Robertson has been leading.
In March at AT&T’s Investor Day, Robertson talked about the company’s efforts to prevent churn of mobility customers. “We started by listening to our customers,” she said. “And you know what they told us, their biggest pain point was that we didn't value existing customers as much as new ones. And that alone made them want to leave.”
She noted that it costs less to retain a customer than to acquire a new one. And retention strategies also give AT&T the opportunity to upsell people to higher-value plans and to upgrade their devices and keep them on installment plans.
The company’s focus on retention seems to be paying off during the last few quarters.
Wireless competition from cable operators
McElfresh also mentioned devices when asked about the competitive landscape and the fact that cable operators Comcast and Charter are now offering wireless services.
“Largely, the cable companies have leveraged a bring-your-own-device model,” he said. “There’s a reason for that. The devices are expensive. The cost to manage a large-scale, attractive customer base in the wireless industry, requires reinvesting in that customer base. That reinvestment takes a capital allocation decision.”
He said AT&T has “now lapped” its investment in the device promotions, and that enables it to now allocate more capital to other things for longer-term value – namely fiber.