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Tuesday, October 31, 2006

Customer Counts

I got slammed by a couple of readers for my comment that “Total Customers” is a more important count than “Post-paid Retail Customers”, so I’d like to take this opportunity to clarify my thoughts on the various elements of customer counts:

1. Affiliates

Sprint includes “affiliates” of 853k in its’ figures: this is ridiculous. Affiliates are in effect just branded customers and I would expect that Sprint only collects a small royalty. An European parallel would be Vodafone including Vodafone Iceland customer figures in its’ count because they are branded Vodafone. Vodafone doesn’t hold any equity share in the Icelandic operations and has only extremely limited control over the operation.

So, I would not recommend using Affiliates in a “true” customer count.

2. Wholesale

As far as I aware Sprint, Cingular and Verizon all include Wholesale customers in their’ “Total Customer” Count. I think this is a big strategic mistake as well. The problem with including these figures in your customers count is twofold:

i) Limited Control on the Additions.

If a wholesale customer decides for whatever reason to turn the tap off whether in terms of marketing or subsidy, then the operator customer figures suffer, therefore creating a problem of perception. An extreme example of this was T-Mobile in the UK when Virgin Mobile was providing the majority of growth and its’ customer base. Sprint is currently heading into dangerous territory over 10% of its’ base accounted for by wholesale customers.

ii) Reduces ARPU comparisons

Obviously a wholesale customer will produce fewer revenues than a similar retail customer: including wholesale customers in the base reduce ARPU figures. T-Mobile tried to get around this by quoting ARPU figures (ex-wholesale base) and Sprint is trying the same tactic. Again, the problem is one of perception.

Personally, I think the best strategy is to count each wholesale customer as just one in the base. Vodafone does this with its’ BT base and obviously the effect is to inflate its’ KPI figures.

3. Prepaid

Prepaid should definitely be included in the base, although I have a problem with the definition of a prepaid customer. Most networks now define a prepaid customer as someone who has made a chargeable event over the last 90 days. I think this is to generous and should instead be altered to someone who has been “connected” over the last 30 days. The reason I use the term “connected” is to avoid the Vodacom issue whereby people were still being counted as users, despite calls just being made to voicemail.

If Mobile Operators feel the need to highlight just how many subsidised phones they have laying around doing not a lot; they can always publish the number of inactive customers.

4. Postpaid

Postpaid is fairly straightforward, however I would love to know how many customers are “out-of-contract”. In other words, what percentage of the customer base are paying the monthly charge whereas they could negotiate a new plan if they so desired.