NEW YORK (CNN/Money) -
Happy Birthday, wireless number portability!
Wednesday marks a year since a Federal Communications Commission rule took effect, allowing consumers to take their phone number with them when switching to a new cell phone carrier.
The FCC said Wednesday that as of October 31, more than 8.5 million customers transferred their numbers. Nearly 8 million of these were consumers switching from one cell phone carrier to another. The rest were traditional landline users transferring their wireline number to a cell phone.
But when wireless number portability kicked, some observers predicted that many more customers would switch. There was a sense that many wireless customers were frustrated with their service and that the only thing preventing many from switching to a new carrier was the hassle involved with getting a new phone number.
So what happened?
Greg Gorbatenko, an analyst with Marquis Investment Research, said that the major wireless carriers all did a good job of aggressively promoting their services to retain customers.
In addition, many lowered their price plans in order to keep churn -- the percentage of customers that drop their service -- at a minimum. That's been good news for consumers.
"Wireless companies spent a boatload of money to prevent churn from happening and pricing per minute dropped significantly," said Gorbatenko. "Prices fell off a cliff and haven't regained."
Going forward, he added, wireless carriers will probably still need to keep prices down in order to prevent subscribers from defecting.
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This would appear to be a problem for the carriers, companies like Verizon Wireless, Cingular, Sprint PCS and Nextel.
But Gorbatenko said the price cuts haven't had a major negative impact on profit margins because all the marketing during the past year resulted in big subscriber gains for most of them. It helped that the carriers were able to promote fancy new features such as high-speed data services and camera functions in order to lure new customers.
Verizon shines
Who are the biggest winners and losers in the portable age?
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| | Company | | Subscribers (as of 9/30/04) | | % gain from a year ago | | Cingular* | 47.6 million | 5.1% | | Verizon Wireless | 42.1 million | 16.9% | | Sprint PCS | 23.2 million | 20.2% | | T-Mobile | 16.3 million | 34.7% | | Nextel | 15.3 million | 24.4% |
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* includes subscrbibers from AT&T Wireless, which Cingular acquired in 10/04 | Source: Company reports |
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Verizon has signed up the most new customers, said Albert Lin, an analyst with American Technology Research. The nation's number two carrier had 42.1 million subscribers as of the end of September, up from 36 million a year ago.
What's most remarkable about such gains, Lin said, is the fact that many of Verizon's competitors offer cheaper plans. Verizon has been able to get away with charging more, because it offers a higher quality service.
"Verizon was a huge net winner and they did not do it by price," Lin said. "Customers left for them because they wanted a better network."
But most carriers have fared well.
Sprint finished the third quarter of this year with 23.2 million subscribers, up more than 20 percent from a year ago. Nextel had 15.3 million subscribers at the end of this September, a 24 percent increase from the same period last year.
And T-Mobile had 16.3 million subscribers at the end of the third quarter, a nearly 35 percent year-over-year increase.
Still, the news is not as encouraging for Cingular Wireless, which, as a result of its purchase of AT&T Wireless last month, is now the nation's largest wireless carrier.
Cingular posted a less than 10 percent year-over-year increase in subscribers while AT&T Wireless reported no gain. AT&T Wireless had been plagued by complaints about poor network quality and software glitches, and Lin said that was a big reason why it did not benefit from the number portability rule change.
Analysts quoted in this story do not own shares of the companies mentioned and their firms have no investment banking relationships with them.
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