Both Experience and Price Seem to Have Driven 2020 Churn in Italy Mobile Market

It is a truism that poor mobile user experience--dropped calls, lack of coverage, slow internet access, outages--or readily available higher value offers will drive customer churn. But churn also is caused when customers conclude that prices are too high, in relation to value.

That seems to be the case in Italy, where customer churn in 2020 seemed to reflect a diminished user experience and desire to pay less. 

According to Opensignal, customers of TIM, Vodafone and WindTre were losing smartphone users, while the lower-cost brands--Kena Mobile, ho. and Very Mobile--gained users. 

At least two different trends might be at work here: customers might be choosing to spend less money on their mobile services, which would explain the subscriber growth for the value brands. 

The other logical conclusion is that customers with a poor experience are switching providers. Assuming they understand how their service is provided, it is not clear why a customer of any of the brands would remain on the same network, but with a “value” alternative, if availability was really the issue. “No signal” issues tend to drive customers to seek a different supplier.

If poor user experience were the key issue, it would be logical for customers to seek a different network provider. Instead, they seem to be “cord shaving” and remaining with the same network provider, but simply moving to a less-costly brand on the same network. That logically suggests churners are moving to other networks. 

The growth of subscribers to the value brands suggests something different, namely customers seeking “value.” They simply want to spend less. 

source: Opensignal

The latest Opensignal data suggests switchers were more likely to have encountered “no signal” issues.

“Leavers across all four national MNOs on average spent between 64 percent and 94 percent more time without a mobile signal compared to the average scores on their networks; they also spent less time connected to either a 3G or 4G mobile connection,” Opensignal notes. “Our data therefore suggests that users experiencing mobile networks' pain points are more likely to change their mobile service provider.”

“Opensignal’s analysis of Italian smartphone users shows that price alone does not explain churn--even in a market like Italy with many low-cost brands--and that mobile network experience is extremely important to understand churn,” Opensignal notes. 

To the extent that additional spectrum is necessary over time to accommodate higher data usage, spectrum rights and a radio infrastructure to deploy that spectrum are necessary preconditions for avoiding poor user experience and customer churn.

In other markets, though reasonable concerns can be raised about the cost of acquiring new spectrum assets, failure to secure adequate spectrum eventually will boost churn rates and impair sustainability. 

So mobile operators must thread a needle: against the danger of overpaying for spectrum is the danger from inadequate spectrum resources. Even with adequate radio infrastructure to provide coverage, lack of capacity eventually drives higher churn.