Operators ‘spend 90%’ of subscriber acquisition budget on countering churn

Operators ‘spend 90%’ of subscriber acquisition budget on countering churn

Steve Polsky Juvo.jpg

Mobile operators in just eight countries spent $670 million last year overcoming churn in their prepaid customers.

A new survey says that annual churn is so high that the cost of re-acquiring customers means that operators miss opportunities to drive loyalty and launch new services for prepaid users.

Steve Polsky (pictured), founder and CEO of mobile services company Juvo, said: “The market opportunity here is 5.7 billion customers and over $265 billion in annual revenue.”

The report, published today, says that operators spent over 90% of their subscriber acquisition expenditure just to replacing churning subscribers and only 10% to subscription and revenue growth.

Prepaid is the dominant form of mobile connection – accounting for 71% (5.7 billion) of global mobile connections and 32% ($265 billion) in service revenues in 2018 – yet very little research has been conducted in the market, said the company.

“We need to talk about prepaid, we need to change our approach and we need to put identity at its heart,” said Polsky. “Prepaid customers in emerging markets consistently churn because they are constantly told no – no you’re out of airtime, no you don’t have enough money.”

In the study, Strategy Analytics analysed eight prepaid-dominant markets for Juvo: Argentina, Brazil, India, Malaysia, Mexico, the Philippines, South Africa and Thailand.

In India the arrival of Reliance Jio a couple of years ago put strong downward pressure on prices – but in the other seven “prepaid is a strong source of profitability for developing market mobile operators, with EBITDA margins falling in the 40-55% range”, says the survey. But churn is high, at 37-80% a year.

Phil Kendall, executive director of Strategy Analytics and author of the report, said: “What this research allows us to do is to confidently calculate the profit that can be unlocked when prepaid churn is reduced.”

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