Surviving the Recession: Finding Wireless Value

Consumers won’t ditch their cell phones, but to weather a recession, wireless operators must make them invaluable

“I'll give up my cell phone when they pry my cold, dead fingers from around it." Dave Chamberlain, principal wireless analyst at In-Stat, doesn’t paint the prettiest image, but he does illustrate the wireless industry’s saving grace in an economic recession: Consumers are attached to their cell phones. As such, value is fast becoming the marketing rally cry for wireless carriers as they grapple with the task of driving revenue from their mobile-reliant consumers who are continuously reevaluating their priorities.

Carriers across the board are pushing the value message by working out holiday-centric deals, emphasizing their prepaid or all-you-can-eat plans, revamping their handset subsidies and playing up the essentialness of the mobile handset. In November alone, AT&T announced a two-for-one holiday special, Verizon Wireless and Alltel introduced new subsidized handsets and Sprint upped its advertising campaign around the value of its “Simply Everything Plans.”

“My family has seen [Sprint CEO] Dan Hesse in my living room more than they see me,” Chamberlain said. “The mobile operators have this marketing need. At this point, the only places they are getting more customers are from other carriers. This is not a time where we are starting to feel any of the pain of this. They need new customers. That is basically it. Do they push down the prices? Probably at the same time, all they have to do is also push down what’s on the phone.”

From Chamberlain’s perspective, it all comes down to marketing. Consumers are smart enough to figure out how many minutes they are using and adjust to a plan that fits their needs and budget, he said. Carriers, meanwhile, need to play the marketing game and emphasize the value of their service, minus all the frills, relative to their competitors. At the same time, they can look to find the balance between cutting costs to retain subscribers and employing a cost strategy that makes the most strategic sense in the long haul.

“Even if you don’t get into a price war, given that the economic conditions are what they are, carriers will try not to go for higher subsidies,” added Shiv Bakhshi, director of mobility research at IDC. “They will at the very least repeal how much they subsidize phones. But the reverse is also true: Given the difficult times, ‘Let me subsidize a bit more so I can attract people.’ Different companies will adopt different strategies. The economic rationale might say they are reaping their device subsidies over time because of data competition and all-you-can-eat pricing.”